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July 4, 2024
The KYC (Know Your Customer) process is mandatory when opening a new bank account, Applying for a Credit Card, or taking out a Personal Loan. The RBI (Reserve Bank of India) has regulated that the service provider must verify the identities of all customers seeking to use financial products to reduce the risk of money laundering and financial fraud.
For Banks and NBFCs, the KYC Process is crucial in confirming customer details and residence. This diligence not only helps prevent terrorist funding and fake interactions but also significantly reduces the risk of financial losses to the Bank when the customer defaults, ensuring the security of the financial system. The maintained KYC records enable effective recovery of the outstanding amount.
The onset of COVID-19 brought unprecedented challenges, with movement restrictions in place to curb the spread of the virus. However, the widespread use of mobile and internet communication technologies played a crucial role in overcoming these challenges, ensuring that essential services could continue.
Overnight delivery apps and online platforms mushroomed, offices were shut down, and employees were asked to work from home. Official meetings were conducted online, and social functions took to Zoom and YouTube, allowing friends and family to participate in the proceedings.
During the pandemic, the RBI allowed banks to open savings and salary-based accounts through online verification. This helps mitigate the challenges of the physical verification process. Customers can upload their documents online, and the bank can verify them through a secure interface.
The success of online verification has led the RBI to extend the jurisdiction for Banks to conduct Video KYC for Processing Personal Loans and Credit Cards. Prominent Banks such as ICICI Bank, YES Bank, and HDFC Bank have a secure system to perform video KYC for customers applying for financial products.
When applying for banking services, the customer must fill out a request form with personal and professional details and submit corresponding documents to support the application.
The RBI has approved standard documentation to initiate a Customer KYC Verification. These include:
Clear and valid copies of KYC Documents will be submitted to enable a successful verification. The KYC Process was initially conducted manually, with the customer going to the Bank to show the original documents or a Bank officer visiting the residence or office to meet the customer to check that the documents submitted are true copies.
Please keep in mind the following requirements for the Video KYC Process:
– The performing bank or organization must be registered with the RBI (Reserve Bank of India) and authorized to conduct the process.
– A secure Wi-Fi connection must be established between the user and the bank officer without any noise or disturbances and with good visibility.
– The applicant’s formal consent is necessary to proceed with the Video KYC.
– Clear copies of KYC documents should be readily available before initiating the process.
– The applicant’s mobile number must be linked to PAN and Aadhaar cards.
– The KYC can be conducted from the documented residence or office address as mentioned in the form details.
KYC Verification is a mandatory process for approving any financial transaction. Credit can be denied if the Lender is not satisfied that the documents submitted are true copies. The Financer can conduct the KYC Process at the primary stage after checking the CIBIL Score and the company category list. Or after all the stages are completed and the request is approved.
Banks use online systems to improve their processes as they prepare for the digital era. People looking for credit are also eager to engage in digital transactions. The Video KYC process eliminates the need for lengthy physical verification and reporting. Customers from any part of the country can now apply for and verify their personal loans entirely online. Leading banks like HDFC Bank, ICICI Bank, and YES Bank have introduced Video KYC, a secure process to prevent fraud and illegal activities.
Though the Video KYC Process is successfully conducted, the industry may not be ready for a complete transformation. Not all customers may have the facility to make online contact and execute the Video KYC Process. Applicants may not have the time and capacity to make contact if the Video KYC Fails on the first attempt.
Although the technology has not yet been adopted by all financial organisations, applicants with vintage documents can face clarity issues while conducting a Video KYC. Therefore, physical verification will remain an alternative for some time to come.
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