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Back in 2002, the Reserve Bank of India introduced KYC or Know Your Customer regulations. It is important for any customer who is willing to connect with financial institutions or initiate financial transactions.
Here, we will explain what KYC is and why it is important for you to complete it.
KYC or Know Your Customer is a process to identify and verify a customer. It is a mandatory process that is done at the time of opening a bank account and over a period of time.
KYC helps to know customers
Aimed to limit money laundering in financial markets
RBI requires all financial institutions to strictly follow KYC procedures
Financial institutions need to be updated KYC records regularly
KYC helps detect fraud in customer accounts
Why is it Mandatory to Complete KYC?
RBI made it mandatory in 2004 for financial institutions to strictly implement KYC to know each and every customer. The reason behind the KYC implementation was the growing number of fraudulent activities in the financial market. With complete KYC, financial institutions will be able to know the background of their customers. Further, on the basis of the customers` background, financial institutions can reject or approve their applications.
In addition, the KYC not only prevents fraud and suspicious activity in the banking sector but also protects online businesses and businesses around the world.
In addition to this, KYC isn't confined to saving you from frauds or suspicious sports withinside the banking quarter however it additionally safeguards online organizations and agencies throughout the globe.
Types of KYC
Aadhaar-based KYC
Aadhar based KYC is a verification process that can be carried out online, making it highly convenient for those with an internet connection. As the name suggests, one needs to upload a scanned copy of their original Aadhar card for this type of KYC.
In-person based KYC
Unlike the online verification mode, in-person verification KYC is carried out offline. To do so, the customer can choose to visit a KYC kiosk, or mutual fund house and authenticate their identity using Aadhar biometrics. One can also call the KYC registration agency to send an executive to their home or office to carry out this verification.