What is KYC and How to do KYC Verification?

KYC (Know Your Customer) is a mandatory process in the banking sector designed to verify customer identities. This verification ensures transparency and security within the financial system by identifying and monitoring customers, thereby preventing financial fraud, money laundering, and terrorist financing. This article will get into what KYC means, explaining the verification process, outlining the various types of KYC available, listing the necessary documentation, highlighting  its critical importance and benefits, and providing step-by-step guidance for both offline and online KYC procedures.

What is KYC in the Bank?

KYC in banks refers to the process of verifying the identity of customers to ensure they are who they claim to be. It involves collecting personal information and documents from customers to establish their identity. KYC helps in preventing identity theft, financial fraud, and other illegal activities in the banking sector.

What is KYC Verification?

KYC verification is the process of confirming the identity of customers through the submission of valid documents. It is a crucial step in opening a bank account, applying for a loan, or conducting any financial transaction. KYC verification helps banks understand their customers better and reduces the risk of fraudulent activities.

Types of KYC

Online KYC 

• Aadhaar e-KYC (OTP or Biometric): Uses your Aadhaar number and a one-time code sent to your phone or your fingerprint/iris scan to confirm who you are.
• Video KYC: You do a live video call with a bank agent and show your original documents.
• Central KYC (CKYC): A one-time KYC done in a central database, so you don't have to repeat the process at every bank or institution when asked for information. 
• Digital KYC: Upload scans or photos of your documents online for verification.
• eSign KYC: You digitally sign documents using Aadhaar authentication. 
• Sector-specific KYC: Some industries, like telecom or insurance, have specific KYC rules based on their needs.

Offline KYC

• Physical KYC: You must submit a physical copy of your ID and address proofs at a bank or branch.
• Aadhaar Paperless Offline e-KYC: You download a digitally signed file from the Aadhaar site and share it with the bank, so they can verify without accessing your full Aadhaar number.

List of Documents Required for KYC

The documents required for KYC verification may vary from bank to bank, but generally include –

• Proof of identity such as an Aadhaar card, PAN card, passport
• Proof of address such as utility bills, rent agreement, and 
• Recent photograph. 

Customers are advised to check with their respective banks for the complete list of documents required for KYC.

Importance of KYC

• Prevents Financial Crimes: KYC procedures help banks detect and prevent activities like money laundering, fraud, and terrorist financing by verifying customer identities and monitoring transactions.
• Ensures Regulatory Compliance: Following KYC norms is mandatory for banks to comply with legal and regulatory requirements, avoid penalties, and maintain their operating licenses.
• Enhances Customer Trust: By ensuring that all customers are verified, KYC creates a secure banking environment, enhancing trust between the bank and its clients.
• Facilitates Risk Management: Through KYC, banks can assess the risk profile of customers, allowing them to make informed decisions and offer appropriate financial products.
• Protects Against Identity Theft: KYC processes protect customers from identity theft and unauthorised account access by verifying personal information.

 Benefits of KYC 

• Protects Against Fraud and Identity Theft: By verifying your identity, KYC ensures no one else can open accounts or misuse your personal information as it acts as a strong shield against fraud and identity theft.
  Enables Faster and Smoother Transactions: Banks and financial services can easily process your transactions without unnecessary delays once your identity is verified, letting you speed up your investment procedure. 
• Prevents Money Laundering and Illegal Activities: KYC helps financial institutions track suspicious transactions and prevents criminals from laundering money or funding illegal activities through the system.
• Builds Trust in the Financial System: Both customers and institutions have been properly identified, therefore boosting trust and confidence, promoting safer business.
• Complies with Legal and Regulatory Requirements: KYC ensures banks and financial entities follow government and RBI rules, keeping you and the institution on the right side of the law.
• Simplifies Future Financial Services: With KYC done once, especially through Central KYC (CKYC), you don’t need to repeat the process every time you want to open a new account or apply for a service with different banks or institutions.

How to Process for Offline KYC Verification?

Offline KYC verification involves visiting the bank branch in person and submitting physical copies of the required documents. 

Step 1: Download the KYC form from your bank’s official website or collect it from your nearest branch.
Step 2: Fill in the required details, including your Aadhaar, PAN, and personal information.
Step 3: Visit your nearest branch of the bank.
Step 4: Submit the filled KYC form along with identity proof, address proof, and other relevant documents.
Step 5: Once your documents are verified, the KYC process will be completed.

How to Process for Online KYC Verification?

KYC online verification can be done through the bank's website or mobile app. Customers need to upload scanned copies of the required documents and fill out the online KYC form. Follow the steps given below to successfully complete your KYC process:

Step 1: Log in to the official website of the bank.
Step 2: Enter your registered mobile number and the OTP received on it.
Step 3: Upload your self-attested e-Aadhaar online.
Step 4: Accept the terms and conditions.
Step 5: The submitted documents will be verified electronically by the bank.

If you don't have a registered mobile number, you can try to do your Aadhaar verification through biometric authentication. In this process, an authorised representative will visit your address. You can show your documents to that representative, and the approval will be intimated to you through SMS or mail. Online KYC verification is convenient and saves time for customers.

KYC plays a vital role in maintaining transparency, security, and compliance within the financial system. By verifying customer identities and understanding their financial profiles, banks can offer more reliable and secure services. Completing the KYC process online or offline is essential for seamless access to banking facilities, enhanced protection against financial crimes, and long-term financial inclusion.

Other KYC Articles:
1. e-KYC Aadhaar - How To Check Aadhaar e-KYC Online And Offline?
2. KYC Update Online - How To Update KYC Details?