KYC (Know Your Customer) Norms

KYC means "Know Your Customer". It is a process by which banks obtain information about the identity and address of the customers This process helps to ensure that banks' services are not misused. The KYC procedure is to be completed by the banks while opening accounts and also periodically update the same.

KYC requirements for opening a bank account

To open a bank account, one needs to submit a 'proof of identity and proof of address' together with a recent photograph.

Documents to be given as 'proof of identity' and 'proof of address'

The Government of India has notified six documents as 'Officially Valid Documents (OVDs)' for the purpose of producing proof of identity. These six documents are

1. Passport
2. Driving Licence
3. Voters' Identity Card
4. PAN Card
5. Aadhaar Card issued by UIDAI and
6. NREGA Card.

One of the above documents is required to be submitted as as proof of identity. If these documents also contain address details, then it would be accepted as as 'proof of address'. If the document submitted does not contain address details, then another officially valid document which contains address details is required to be submitted.

In absence of above noted officially valid documents, a normal account can be opened by submitting a copy of any one of the following documents:

1. Identity card with person's photograph issued by Central/State Government Departments, Statutory/Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, and Public Financial Institutions;
2. Letter issued by a gazetted officer, with a duly attested photograph of the person.

This, however, is not a general rule and it is left to the judgement of the banks to decide whether this simplified procedure can be adopted in respect of any customer.

Small Accounts

A 'Small Account' can be opened by submitting recent photograph and putting signature or thumb impression in the presence of the bank official. The small accounts have following limitations:

• Balance in such accounts at any point of time should not exceed Rs.50,000.
• Total credits in one year should not exceed Rs.1,00,000.
• Total withdrawal and transfers should not exceed Rs.10,000 in a month.
• Foreign remittances cannot be credited to such accounts.

Small accounts remain operational initially for a period of twelve months and thereafter, for a further period of twelve months, if the holder of such an account provides evidence to the bank of having applied for any of the officially valid documents within twelve months of the opening of such account. The bank will review such account after twenty four months to see if it requires such relaxation.

e-KYC

e-KYC is possible only for those who have Aadhaar numbers While using e-KYC service, you have to authorise the Unique Identification Authority of India (UIDAI), by explicit consent, to release your identity/address through biometric authentication to the bank branches/business correspondent (BC). The UIDAI then transfers your data comprising name, age, gender, and photograph of the individual, electronically to the bank/BC. Information thus provided through e-KYC process is permitted to be treated as an 'Officially Valid Document' under PML Rules and is a valid process for KYC verification.

Important Points

• if you have opened an account with a bank branch, which is KYC compliant, then for opening another account with the same bank branch, furnishing of KYC documents is not necessary.
• Full KYC exercise is necessary for Credit/Debit/Smart/for purchaser of Gift Cards and also in respect of add-on/ supplementary cards.
• KYC exercise needs to be done for all those who want to make domestic remittances of ₹ 50,000 and above and all foreign remittances.
• All customers who do not have accounts with the banks have to produce proof of identity and address while purchasing third party products (like insurance or mutual fund products) from banks if the transaction is for Rs.50,000 and above.
• Banks are required to periodically update KYC records. This is a part of their ongoing due diligence on bank accounts. The periodicity of such updation varies from account to account or categories of accounts depending on the bank's perception of risk. Periodical updation of records also helps prevent frauds in customer accounts.
• Customers who are minors have to submit fresh photograph on becoming major.
• If a customer fails to provide your KYC documents at the time of periodic updation bank has the option to close the account. Before closing the account, the bank may, however, impose 'partial freezing' (i.e. initially allowing all credits and disallowing all debits while giving an option to to close the account and take the money back). Later even all credits also would not be allowed. The 'partial freezing' however, would be exercised by the bank after giving you notice.
  • While imposing 'partial freezing', banks have to give due notice of three months initially to the customers before exercising the option of 'partial freezing'.
  • After that a reminder for further period of three months would be issued.
  • Thereafter, banks may impose 'partial freezing' by allowing all credits and disallowing all debits with the freedom to close the accounts.
  • If the accounts are still KYC non-compliant after six months of imposing initial 'partial freezing' banks may disallow all debits and credits from/to the accounts, rendering them inoperative.

For further information on the above subject please visit RBI website

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