What is the Meaning of KYC?
The KYC meaning is Know Your Customer. All financial and non-financial institutions in India must carry out this process for all their clients. Financial institutions usually frame KYC policy by incorporating some key elements. These fundamental elements include customer policy, customer identification procedures, monitoring of transactions and risk management.
Apart from financial institutions, the Securities and Exchange Board of India (SEBI), Insurance Regulatory Development Authority (IRDA) and others have also made it mandatory.
Six documents have been mandated as official KYC documents by the government of India. One should submit any one of these mentioned below as proof identity and address.
- Proof of identity – PAN card, Aadhaar card, Passport, Voter ID card, Driving License.
- Proof of address – Recent electricity bill, landline telephone or cell phone bill, ration card, voter ID card, driving license, rental agreement, demat account statement, passport.
These documents should be provided along with a KYC application form, a passport size photograph and proof of date of birth to accelerate the process.
When is KYC required?
KYC is required during any transactions with financial institutions in India and official procedure such as –
- When opening a bank account.
- Applying for a loan.
- Applying for a new SIM card.
- While availing gas or electricity connection in India.
- While opting for a new insurance policy.
The benefits of KYC
The KYC process is beneficial for several reasons. Some of these are given below –
- It is a step towards ensuring that all monetary transactions are legitimate and transparent.
- It has been introduced to prevent fraudulent activities from taking place.
- KYC has been established to check the credibility of customers.
Though most individuals find the KYC meaning process troublesome, it has also been successful in reducing fraud and preventing several money laundering activities.