Your first step to the world of finance is ‘KYC’. KYC is an abbreviation for Know Your Customer. Under the Prevention of Money Laundering Act, 2002 (PMLA), it is mandatory for all financial institutions and intermediaries to complete the KYC process before initiating any financial transaction for a customer. Financial institutions/intermediaries are regulated either by the RBI or SEBI.

A customer has the following options to complete the KYC process:

• IPV (Physical) KYC
• Digital KYC
• IPV (Physical) KYC

The In-Person Verification KYC (also known as Physical KYC) is mandatory for any customer to transact in the capital markets. The Securities and Exchange Board of India (SEBI) issues guidelines under the PMLA Act, governing this form of KYC. It is mandatory for every investor/trader to complete this process at the time of opening a trading or a depository (DEMAT) account. Customers are required to submit a duly filled and signed KYC form along with a recent photograph, self-attested Proof of Identity and Address. To complete the KYC, process a customer needs to visit the intermediary for IPV. One must also carry their original Proof of Identity and Address for verification.

With the advent of technology, the regulator has permitted the completion of the IPV process virtually (subject to fulfilment of certain conditions).

Digital KYC

As the name suggests it is a completely paperless process. Here customers are required to have their mobile numbers linked with their Aadhaar. The UIDAI will send an OTP on the registered mobile number of the customer, permitting following which the customer is required to just upload their PAN card copy and complete the KYC process.

following which the customer is required to just upload their PAN card copy and complete the KYC process.

Customers who are sailors (seafarers) are also categorised as NRIs. However, they do not have any foreign addresses since they are at sea. They can complete the IPV KYC process by submitting the Continuous Discharge Certificate (CDC)

CKYC

Another form of KYC that is conducted physically is CKYC. The Government saw the need for a standardised KYC process for the finance industry, which apart from covering the capital markets also integrates the banking sector. Thus, in the Union Budget 2012-13, the government introduced CKYC and it came into existence in the year 2016. CKYC is the abbreviation for Central Know Your Client. It is a centralised database that saves the data of all clients. The Central Registry of Securitisation and Asset Reconstruction and Securities Interest of India (CERSAI) manages CKYC registration process. This type of KYC helps customers and financial institutions skip the long and tedious platform.

CKYC has the following features:

• A system generated 14-digit unique number is provided to the customer.
• The data is stored in an electronic format
• The concerned financial institutions are notified as and when there is a change in the KYC details

Is KYC important?

Customers often find it very tedious and irritating when they are asked to either complete or update their KYC. However, they must understand that it is only in their interest that they follow all the requirements of completing and updating their KYC data at regular intervals to avoid any fraudulent activities occurring in their accounts. Thanks to the stringent KYC norms put in place by the Indian regulators RBI and SEBI, the financial system has not seen any major fraud in relation to the misuse of investor data.

Hence once again investors are suggested to give utmost importance to this ‘gateway to the world of finance.’

Views are personal: The author - Raghavv S Roongta is associated with Roongta Securities Pvt. Ltd and is a founder of YouTube channel ‘cluelessabtfinance’

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