The term ‘Know Your Customer’ (abbreviated as KYC) refers to the procedure used by banks, insurance companies, and other financial organizations to verify the identities and addresses of all customers and clients before or during the course of conducting transactions with them. All banks, financial institutions, and other digital payment firms that conduct financial transactions are required to complete the KYC process using the KYC documents list as per the Reserve Bank of India (RBI).
Let us know more about KYC and the five important List of KYC documents everyone should possess as proof of their identity and address.
What is the significance of KYC?
Know Your Customer, or KYC is a required procedure that ensures the accuracy and authenticity of a potential customer’s personal information before granting them access to any financial or other types of services. The KYC procedure is currently gaining popularity in the telecom, mobility, and eCommerce sectors and is already generally accepted in the banking and financial services industries.
Companies and service providers in these industries have been able to reduce the incidence of fraud and cybercrime thanks to the institutionalization of KYC processes and the use of KYC documents list. Historically, however, the manual KYC method has been costly, capital-intensive, and time-consuming.
With the advent of eKYC, or online KYC, it is now possible and common to execute the KYC procedure digitally but in this case, you will require a soft copy of the KYC documents list. Advanced technological developments have made the entire KYC process quicker, easier, and more affordable. With the help of automated KYC service providers can come across manual errors while it is also a less capital-intensive approach.
When do we require KYC?
Knowing the significance of KYC and why it is necessary is crucial once you have grasped its definition. Although completing the KYC/eKYC procedure is legally required, doing so also enables clients to access the many premium products that the financial firm offers and speeds up transaction times. However, to complete the KYC process (be it online or offline) you need to remember the KYC documents list.
Banks require KYC
The frequency of KYC updates and completion varies from account to account depending on the bank’s assessment of risk. Consequently, the KYC documents list becomes essential when carrying out tasks like creating bank accounts, investing in fixed deposits, recurring deposits, mutual fund accounts, and making online investments.
Since KYC enables banks to confirm that the application received and any other information is related to a valid client, it has become essential. By confirming a person’s identification, banks are able to forecast and stop fraud with ease.
KYC needed for insurance and investment
In order to prevent the use of black money, KYC information is required to ensure that investments and insurance policy purchases are made by legitimate people. As a result, all life insurance and mutual fund investors must follow the KYC procedure through a KYC Registration Agency (KRA), in accordance with the rules established by IRDAI (Insurance Regulatory and Development Authority of India) and SEBI (Securities and Exchange Board of India).
5 must-have KYC documents you will require for Identity and Address verification
Documents that can function as your proof of Identity
Any original copy of the following documents can be considered as your proof of identity and smoothly comes under the KYC documents list:
- Voter identity card
- Aadhar card
- PAN card
- Passport Driving license
- Driver’s license
Documents that can function as your proof of address
Although you can use your Aadhar card for address verification, however in some cases your residential address and permanent address can be different. In that case, you can use the following documents that come under the KYC documents list:
- Your rent agreement
- Telephone, electricity, and gas bills
- An official letter from the current employer
- Property tax bills
- Bank statements attested by the current bank manager
In order to submit all of the following papers digitally, you must also have digital copies of the KYC documents list. Companies may quickly confirm an applicant’s identity and assess their risk level via the online KYC procedure.