What is KYC, Full Form of KYC, KYC Documents
In banking and financial services today, we are coming across the term KYC frequently. All the financial institutions including banks have issued mandatory guidelines to perform KYC. Often times customers don’t understand the complete process and purpose of KYC which leads to confusion and mis-understanding. In order to resolve this confusion, aznetbanking presenting a full detailed article on to enhance your knowledge.
What is Full form of KYC
Ok first thing first. We need to be aware of full form of KYC. It is ‘Know Your Customer‘ and sometimes it can be Know Your Client. Considering the sensitivity of financial transactions, KYC has become an important part of any financial activity.
Why is it necessary?
In order to open a bank account, customer needs to submit all the documents related to their identity and residential proof. This is to ensure that the person is genuine and has true identity.
Without verification any person with fake identity can perform any kind of finacial activity such as money laundering and escape easily. However KYC makes it almost impossible for anyone to do such frauds.
Is it mandatory?
Yes. Without proper KYC document submission, you cannot open bank account in India. You must present valid documents to open bank account. Even SEBI has made it mandatory to comply with the norms to open a demat trading account.
Process: 4 Important Steps of KYC
KYC has three important steps involved in the process. These are
- Customer Acceptance Policy
- Customer Identification
- Customer Verification
- Transaction Monitoring
1. Customer Acceptance Policy: In this, bank will perform preliminary checks about customer’s identity. These checks include formal introduction, profession of the customer, purpose of visiting bank etc. These preliminary checks are important part as these help banks to verify genuineness of the customer
2. Customer Identification: Verifying officially valid documents such as Aadhar Card, PAN card, license or any government allotted identity card. This is the process when you
3. Monitoring Transactions: Banks monitor the transactions of newly opened account. They keep track on whether any suspicious transactions are occurring on the account.
4. Risk Management: Managing risk is crucial when it comes to financial transactions. Banks mandatorily create systems to monitor and eliminate risks with effective risk management strategy.
What are acceptable KYC documents?
Documents which have your picture and residential address on them can be considered as OVDs (Official Valid Documents). Most of the banks accept following types of OVDs.
- Voter ID Card
- Passport Driving License
- NREGA Job Card &
- Others Letter issued by National Population Register containing details of name,
- Aadhaar card
