What is KYC Full Form ?

KYC stands for "Know Your Customer". Today in banking and financial services, we are seeing the term KYC time and again. All financial institutions including banks have issued mandatory guidelines for doing KYC. Many times customers do not understand the entire process and purpose of KYC which leads to confusion and misunderstanding.

KYC Full Form

To clear this confusion, We are presenting a complete detailed article to enhance your knowledge. KYC is a set of documents that are required to establish the identity of an individual. Generally, KYC has an identity proof with photograph and address proof are the two basic mandatory KYC documents which are required to establish one's identity while opening a bank account, any financial services, fixed deposit, mutual fund, insurance, etc. Financial institutions may also require you to present proof of income before opening a bank account, issuing a credit card, or issuing an insurance policy. The Reserve Bank of India has made it mandatory for banks and other financial institutions to perform KYC formalities before undertaking any kind of transaction with their customers. The KYC process authenticates the identity and address of the customer and the authentication is done through the documents provided by the customers. You can find the documents required for KYC and any type of KYC compliance covered under the Prevention of Money Laundering Act 2002.

The main reason for introducing KYC in the financial market was to reduce the cases of money laundering and tax fraud. This could have been possible only if the source and distance of the money were known. The process of KYC was further strengthened in the case of investments and money transactions. The KYC process is very strict nowadays.  In recent times KYC documents include the customer's photograph and it is mandatory for all, through KYC fraudulent transactions, fraudulent accounts, and money laundering became prevalent. ALL banks, other financial institutions, telecom companies, and some government departments also required these documents to establish the true identity of an individual before proceeding with any transaction. Income proof is required to ensure that the source or funds are clean.

 

Types of KYC in India

Basically, all organizations have two types of verification processes and you can see them below:-

Online KYC

In the online KYC process, the bank or financial institution verifies its customers digitally. All you need to do is download the KYC form and fill in the required details related to your document. Then you have to upload a copy of the documents mentioned in the form. Once you submit all the documents, the bank or institution authenticates the details of the customer and the KYC process is complete. Online KYC is also known as E KYC. It also includes obtaining information from government-issued smart IDs through an ID that extracts government data that involves the use of a digital identity authorized for facial recognition on a chip or online verification. EKYC is very popular in India as 99% of the Indian population has a digital identity. This method is more and more popular because its accuracy is very high due to the use of artificial intelligence.

Offline KYC

In offline KYC, a representative of the bank meets the person and then verifies all his documents. He may ask for a copy of the documents and then authenticate your profile. This offline process of KYC verification is also known as In-Person-Verification (IPV).

Document Required for KYC

As per the Indian government guidelines, 6 documents are officially Valid Documents (or OVD)' and can be considered for verification of identity. To update the KYC record Sometimes you have to submit the KYC documents to any institute, or organization from time to time. Following are the documents required for the KYC process:

  • Voter ID Card
  • Passport
  • Driving License
  • NREGA Job Card
  • Aadhaar card
  • Pan Card