- What is KYC?
KYC or Know Your Customer is the mechanism through which banks or other investment institutions verify the identity of the customer to prevent any sort of fraud, theft or duplication.
- Importance of KYC
KYC is crucial for both practical and legal aspects. Practically concerned, a thorough KYC ensures that nobody can impersonate you to gain access to your bank account(s) or alter any of your investments or even withdraw them.
KYC provides many layers of information to the institution so that it can easily and quickly verify the identity of the customer even if one data point is compromised or disrupted. Verification can be as simple as confirming your date of birth, mobile number or address.
Legally concerned, KYC is necessary for mutual funds investments and also for opening bank account. The Securities and Exchange Board of India(SEBI) and the Association of Mutual Funds in India(AMFI) together decided on this in 2012. Prior to 2012, it was compulsory to deposit a PAN(Permanent Account Number) copy to engage in investments of Rs.50,000 and more in one financial year.
- Documents Required for KYC
SEBI said that a common KYC process can provide uniformity and consistency across all the SEBI registered investments intermediaries. This made the KYC procedures very customer-friendly to comply with it, it also helped portfolio managers, mutual fund companies, venture capital funds and stock brokers curb the duplication of documents. The documents required are ID proofs and Proof of Address. For ID Proof, one can bring any one of PAN card, driving license, Passport copy, Voter ID, Aadhaar Card or Bank Photo Passbook.
For Proof of Address, one can bring any one of recent mobile bill, passport copy, electricity bill, recent Demat account statement, latest bank passbook, ration card, Voter ID, rental agreement, driving license or Aadhaar Card.
For offline KYC process, physical submission of copies of the documents can be done and for online, using Aadhaar and one-time password (OTP) on the phone number linked to the Aadhaar can be done.