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KYC(Know Your Customer)

The Reserve Bank of India (RBI) has advised banks to follow a 'KYC guidelines', wherein certain personal information of the account-opening prospect or the customer is obtained. The objective of doing so is to enable the Bank to have positive identification of its customers. This is also in the interest of customers to safeguard their hard earned money. The KYC guidelines of RBI mandate banks to collect three proofs from their customers. They are
1. Photograph
2. Proof of identity
3. Proof of address
Accordingly, Banks have framed their KYC procedure according to which, a photograph and documentary proof of personal identification and address proof are required to be provided.

1.What is KYC?

KYC is an acronym for “Know your Customer”, a term used for customer identification process. It involves making reasonable efforts to determine true identity of customer, the nature of customer’s business, reasonableness of operations in the account in relation to the customer’s business, etc which in turn helps the banks to manage their risks prudently. The objective of the KYC guidelines is to prevent banks being used, intentionally or unintentionally by criminal elements for money laundering.

Know Your Customer - KYC enables banks to know/ understand their customers and their financial dealings to be able to serve them better KYC has two components - Identity and Address. While identity remains the same, the address may change and hence the banks are required to periodically update their records.

2.When does KYC apply? Is there any procedure specified for Customer Identification?

KYC will be carried out at the following stages:

  • • Opening a new account
  • • Opening a subsequent account where documents as per current KYC standards not been submitted while opening the initial account
  • • Opening a Locker Facility where these documents are not available with the bank for all the Locker facility holders
  • • When the bank feels it necessary to obtain additional information from existing customers based on conduct of the account
  • • When there are changes to signatories, mandate holders, beneficial owners etc

Customer identification means identifying the customer and verifying his/her identity by using reliable, independent source documents, data or information. Banks have been advised to lay down Customer Identification Procedure to be carried out at different stages i.e. while establishing a banking relationship; carrying out a financial transaction or when the bank has a doubt about the authenticity/veracity or the adequacy of the previously obtained customer identification data.

3. What proof of identity will you need?

The best identification documents are those, which are issued by a Government authority, which should have a photograph, address and signature. For individual documents like copy of the Passport, Election Identity Card, Permanent Account Number (PAN) card, etc. would be sufficient for the purpose of establishing the identity of a customer. This has to be submitted along with a document to establish the address of the customer. You may approach the nearest branch of the Bank for the list of acceptable documents to be submitted for proof of identity and address. Similarly, for other entities like firms, companies, trusts, etc., documents like Partnership Deed, Trust Deed, Memorandum & Articles of Association, Certificate of Incorporation, Registration and Service Tax, License under Shops and Establishment Act, etc. would be applicable and the branch / sales staff / call center would be able to help you in providing the details of the list of approved documents.

4.What will happen if you do not provide the required KYC information / documents to the Bank?

The Bank will be entitled to refuse to open the account (if you are a prospective customer) or discontinue its relationship with you citing non-providing of KYC information / documents (if you are an existing customer). If you however, require reasonable time to furnish certain non-critical documents you can approach the branch / sales staff.

5.What are the documents required in compliance with the KYC norms?

Features Documents
Individuals
Legal name and any other names used
  1. Passport 
  2. PAN card
  3.  Voter's Identity Card
  4.  Driving license
  5. Aadhar Card
  6. Identity card (subject to the bank's satisfaction)
  7.  Letter from a recognized public authority or public servant verifying the identity and residence of the customer to the satisfaction of bank
Correct permanent address
  1. Passport 
  2. PAN card
  3.  Voter's Identity Card
  4.  Driving license
  5. Aadhar Card
  6. Identity card (subject to the bank's satisfaction)
  7.  Letter from a recognized public authority or public servant verifying the identity and residence of the customer to the satisfaction of bank
Companies
Name of the company
  1. Certificate of incorporation and Memorandum & Articles of Association
  2. Resolution of the Board of Directors to open an account and identification of those who have authority to operate the account 
  3.  Power of Attorney granted to its managers, officers or employees to transact business on its behalf 
  4.  Copy of PAN allotment letter 
  5. Copy of the telephone bill
Partnership Firms
  1. • Legal name
  2. • Address
  3. • Names of all partners and their addresses
  4. • Telephone numbers of the firm and partners
  1. Registration certificate, if registered
  2. Partnership deed 
  3.  Power of Attorney granted to a partner or an employee of the firm to transact business on its behalf 
  4.  Any officially valid document identifying the partners and the persons holding the Power of Attorney and their addresses 
  5. Telephone bill in the name of firm / partners
Trusts & Foundations
  1. • Names of trustees, settlers, beneficiaries and signatories
  2. • Names and addresses of the founder, the managers / directors and the beneficiaries
  1. Certificate of registration, if registered
  2. Power of Attorney granted to transact business on its behalf
  3.  Any officially valid document to identify the trustees, settlers, beneficiaries and those holding Power of Attorney, founders / managers / directors and their addresses
  4.  Resolution of the managing body of the foundation / association
  5. Telephone bill
Telephone / fax numbers
Proprietorship Concerns
Proof of the name, address and activity of the concern
  1. Registration certificate (in the case of a registered concern
  2. Certificate / license issued by the Municipal authorities under Shop & Establishment Act
  3.  Sales and income tax returns
  4.  CST / VAT certificate
  5.  Certificate / registration document issued by Sales Tax / Service Tax / Professional Tax authorities
  6.  Registration / licensing document issued in the name of the proprietary concern by the Central Government or State Government Authority / Department. 
  7. IEC (Importer Exporter Code) issued to the proprietary concern by the office of DGFT as an identity document for opening of bank account. 
  8. License issued by the Registering authority like Certificate of Practice issued by Institute of Chartered Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries of India, Indian Medical Council, Food and Drug Control Authorities, etc.

Any two of the above documents would suffice. These documents should be in the name of the proprietary concern.