Know your Customer (KYC) isn’t simply financial lingo anymore. It is as important as a banking credential and often regarded as the measure of your authenticity, by relevant financial institutions. KYC or Know Your Customer is more of a tool that financial firms, NBFCs, online banks, and even traditional offline services use for due diligence.
KYC and KYC Full Form
As mentioned, KYC full form stands for Know Your Customer, which is also a self-explanatory method to get the credibility checked, authenticated, and validated. Financial firms rely on transactions that involve money and assets.
Managing these transactions without considerable proof of identity or rather an authenticity is dangerous and outright foolhardy. This is why most banks and lending institutions have the KYC requirements in place to ensure that only eligible customers have access to concerned accounts. This way, financial activities are better regulated and issues pertaining to money laundering take a backseat.
Most importantly, RBI, at least a few years back, made KYC verification of customers essential on the part of financial institutions, especially if the financial activities concern monetary transactions.
Why is KYC Vital?
Without KYC, it becomes difficult for financial institutions to identify you as a credible customer. Plus, the lack of KYC cuts down several lines of banking authentication, which then makes it easy for unscrupulous individuals to gain access to certain customer accounts.
Plus, its absence in the financial continuum can disrupt services like stock trading, brokerages, mutual fund savings and investments, and even something as standard as bank deposits.
KYC: Types and Documents
Before delving deeper into the concept of KYC, you must understand how it works. KYC as an entity doesn’t mean a lot but signifies credibility when termed as KYC verification. If the process uses online avenues where only the scanned Aadhaar card is required for authentication, it is termed eKYC.
Physical remittance of documentation or rather in-person interactions is tagged as standard KYC verification.
As far as the documents are concerned, you can furnish any identity and any address proof of choice, including Aadhar, passport, voter ID, Pan card, driver’s license, recent utility bill, and more. If the concerned financial firm even asks for proof of your income, salary slips and even bank statements are admissible.
More about eKYC
Electronic KYC or eKYC is one of the easiest approaches that financial instructions recommend for initiating customer identification, account owner identification, document-based verification, and information analysis in case of loan and credit requirements.
eKYC is paperless and smoother as compared to Offline-KYC or oKYC. Moreover, if Aadhaar is your preferred approach towards getting authenticated as a customer, eKYC can be beneficial as it allows access to the UIDAI database and helps you get an eAadhaar for online verification.
The entire process of verification becomes easier with eKYC as the online document simply needs to be uploaded onto the concerned platform.
Firstly, you need not lose sleep over the eKYC meaning, as it simply means getting authenticated online, with an electronically generated KYC document. However, different financial institutions have different perspectives towards KYC and the same should be conveyed to the customer for seamless verification.