KYC is basically the acronym for Know Your Customer. It is a background check that banks, financial institutions, and other entities do to verify the authenticity and identity of a customer. It was mandated by the Reserve Bank of India (RBI) in the year 2004 to curb unauthorized use and prevent financial frauds like money laundering. The Reserve Bank of India’s KYC norms has worked very well in curbing illegal financial schemes and transactions. Here’s some more information on just how important KYC is in the banking and financial services sector.
Importance of KYC in Banking
KYC in banking is generally carried out to reduce the financial risk that the bank undertakes. By verifying the identity and authenticity of the customer, banks can rest assured of the veracity of the transactions being carried out. Also, in the case of an illegal or suspicious transaction, it makes it easier for banks to identify the customer and take appropriate measures as soon as possible.
Without successfully satisfying the KYC norms, individuals are not allowed to open bank accounts or other financial accounts. Only upon successful verification of KYC are individuals even allowed to transact. That’s not all. KYC in banking is not a one-time affair. In fact, periodically, you will be asked by banks to do mandatory KYC updates. Failure to do a KYC update in time may even result in a temporary freeze of your accounts as well.
What Does eKYC Mean?
Okay so, now that you know what KYC in banking is and its importance, let’s take a look at the eKYC meaning.
To successfully satisfy the KYC norms, individuals are required to submit copies of their identity proof and address proof to the banking or financial institution. To do this, individuals will have to visit a physical branch. Here’s where eKYC comes into the picture.
With eKYC, verification of an individual’s identity can be done completely online without having to ever visit a physical branch. This not only makes KYC in banking more convenient but also saves a lot of time and effort. But then, how is the eKYC verification carried out?
It is done through the Aadhaar verification process. Banks and financial institutions that are authorized by the Unique Identification Authority of India (UIDAI) allow you to verify your identity through Aadhaar OTP or biometric authentication.
How to Update KYC Online?
Now that you know the eKYC meaning, let’s take a look at how you can update your KYC online.
- Firstly, visit the official website of your bank and log into your account using your user credentials.
- Navigate to the KYC section and fill in all of the details mandated in the KYC form.
- Select the proof of identity and proof of address documents that you wish to submit.
- Authorize the KYC update and enter the captcha code, if any.
- Submit the form online.
- Upon submitting the same, download the filled form, sign it, attach self-attested copies of your KYC documents.
- You can either submit them directly to the bank or can even mail them to them.
Alternatively, if your bank supports eKYC, you can choose to authenticate your identity through Aadhaar OTP or Aadhaar-based biometric verification for a completely paperless and digital process.
As you’ve already seen above, KYC in banking is an important and integral part that you need to satisfy. Ensure that you do the necessary KYC updates on time to prevent your accounts from becoming unoperational.