Know Your Customer Guidelines

What is KYC

1. What is KYC? Why is it required?

KYC means “Know Your Customer”. It is a process by which banks obtain information about the identity and address of the customers. This process helps to ensure that banks’ services are not misused. The KYC procedure is to be completed by the banks while opening accounts and also periodically update the same.

2. What are the KYC requirements for opening a bank account?

To open a bank account, one needs to submit a Aadhaar/enrolment number and PAN as ‘proof of identity and proof of address’ together with a recent photograph.

3. If I refuse to provide requested documents for KYC to my bank for opening an account, what may be the result?

If you do not provide the required documents for KYC, the bank may not be able to open your account.

4. Do I have to furnish KYC documents for each account I open in a bank even though I have furnished the documents of proof of identity and address?

No, if you have opened an account with a bank, which is KYC compliant, then for opening another account with the same bank, furnishing of documents is not necessary.

5. Whether KYC is applicable for Credit/Debit/Smart/Gift cards?

Yes. Full KYC exercise is necessary for Credit/Debit/Smart/for purchaser of Gift Cards and also in respect of add-on/ supplementary cards.

6. I do not have a bank account. But I need to make a remittance. Is KYC applicable to me?

Yes. KYC exercise needs to be done for all those who want to make domestic remittances of Rs. 50,000 and above and all foreign remittances.

7. Can I purchase a Demand Draft/Payment Order/Travellers Cheque against cash without KYC?

Demand Draft/Payment Order/Travellers Cheques for Rs.50,000/- and above can be issued only by way of debiting the customer's account or against cheques.

8. Do I need to submit KYC documents to the bank while purchasing third party products (like insurance or mutual fund products) from banks?

Yes, all customers who do not have accounts with the banks (known as walk-in customers) have to produce proof of identity and address while purchasing third party products from banks if the transaction is for Rs.50,000 and above. KYC exercise may not be necessary for bank’s own customers for purchasing third party products. However, instructions to make payment by debit to customers’ accounts or against cheques for remittance of funds/issue of travellers’ cheques, sale of gold/silver/platinum and the requirement of quoting PAN number for transactions of Rs.50,000 and above would be applicable to purchase of third party products from banks by bank’s customers as also to walk-in customers.

9. My KYC was completed when I opened the account. Why does my bank insist on doing KYC again?

Banks are required to periodically update KYC records. This is a part of their ongoing due diligence on bank accounts. The periodicity of such updation would vary from account to account or categories of accounts depending on the bank’s perception of risk. Periodical updation of records also helps prevent frauds in customer accounts.

10. Are banks required to categorise their customers based on risk assessment?

Yes, banks are required to classify the customers into ‘low’, ‘medium’ and ‘high’ categories depending on their AML risk assessment.

11. Do banks inform customers about this risk categorisation?

No

12. What are the rules regarding periodical updation of KYC?

• Different periodicities have been prescribed for updation of KYC records depending on the risk perception of the bank. KYC is required to be done once in every two years for high risk customers, once in every eight years for medium risk customers and once in every ten years for low risk customers. This exercise would involve all formalities normally taken at the time of opening the account.
• During the process, the following are carried out.
• PAN verification from the verification facility available with the issuing authority and
• Authentication, of Aadhaar Number already available with the RE with the explicit consent of the customer in applicable cases.
• In case identification information available with Aadhaar does not contain current address an Officially Valid Documents (OVDs) containing current address may be obtained.
• Certified copy of OVD containing identity and address shall be obtained at the time of periodic updation from individuals not eligible to obtain Aadhaar, except from individuals who are categorised as ‘low risk’. In case of low risk customers when there is no change in status with respect to their identities and addresses, a self-certification to that effect shall be obtained.
• Customers who are minors have to submit fresh photograph on becoming major.
• REs may not insist on the physical presence of the customer for the purpose of furnishing OVD or furnishing consent for Aadhaar authentication/Offline Verification unless there are sufficient reasons that physical presence of the account holder/holders is required to establish their bona-fides. Normally, OVD/Consent forwarded by the customer through mail/post, etc., shall be acceptable.

Proof of Identity and Proof of address

1. What are the documents to be given as ‘proof of identity’ and ‘proof of address’?

• For an individual who is eligible for enrolment of Aadhaar, the Aadhaar number; the Permanent Account Number (PAN) or Form No. 60 as defined in Income-tax Rules, 1962, as amended from time to time is required.
• Where an Aadhaar number has not been assigned to an individual, proof of application of enrolment for Aadhaar shall be obtained wherein the enrolment is not older than 6 months and in case PAN is not submitted, certified copy of an Officially Valid Document (OVD) containing details of identity and address and one recent photograph shall be obtained.
• For residents of the State of Jammu and Kashmir or Assam or Meghalaya, and who does not submit Aadhaar or proof of application of enrolment for Aadhaar, the following shall be obtained:

1. certified copy of an OVD containing details of identity and address and
2. one recent photograph

The Government of India has notified following documents as ‘Officially Valid Documents (OVDs)'.

• Passport,
• Driving Licence,
• Voters’ Identity Card
• PAN Card
• Aadhaar Card issued by UIDAI and
• Job card issued by NREGA duly signed by an officer of the State Government
• Letter issued by the National Population Register containing details of name and address

In case the identity information relating to the Aadhaar number or Permanent Account Number submitted by the customer does not have current address, any of the following documents is to be submitted.

1. utility bill which is not more than two months old of any service provider (electricity, telephone, post-paid mobile phone, piped gas, water bill);
2. property or Municipal tax receipt;
3. pension or family pension payment orders (PPOs) issued to retired employees by Government Departments or Public Sector Undertakings, if they contain the address;
4. letter of allotment of accommodation from employer issued by State Government or Central Government Departments, statutory or regulatory bodies, public sector undertakings, scheduled commercial banks, financial institutions and listed companies and leave and licence agreements with such employers allotting official accommodation;

Provided further that the customer shall submit Aadhaar or OVD updated with current address within a period of three months of submitting the above documents.

2. If I do not have any of the documents (Aadhaar/enrolment number and PAN) to show my ‘proof of identity’, can I still open a bank account?

Yes. You can still open a bank account known as ‘Small Account’ by submitting your recent photograph and putting your signature or thumb impression in the presence of the bank official. The Small Account entails the following limitations:

• the aggregate of all credits in a financial year does not exceed rupees one lakh;
• the aggregate of all withdrawals and transfers in a month does not exceed rupees ten thousand; and
• the balance at any point of time does not exceed rupees fifty thousand.

The account shall remain operational initially for a period of twelve months which can be extended for a further period of twelve months, provided the account holder applies and furnishes evidence of having applied for any of the OVDs during the first twelve months of the opening of the said account.

3. If I am staying in Chennai but if my address proof shows my address of New Delhi, can I still open an account in Chennai?

Yes. You can open a bank account in Chennai even if your permanent address is in New Delhi and you do not have a proof of address for your Chennai address. In that case, you can submit an officially valid document (proof of address document) of your New Delhi address together with a declaration about your Chennai address, for communication purposes. However, you need to submit Aadhaar or OVD updated with current address within a period of three months of submitting the above documents.

4. Can I transfer my existing bank account from one place to another? Do I need to undergo full KYC again?

Yes, it is possible to transfer an account from one branch to another branch of the same bank. There is no need for KYC exercise again to transfer a bank account from one branch to another branch of the same bank. However, if there is a change of address, then you would have to submit a declaration about the current address. If the address in the ‘officially valid documents’/ ‘proof of address’ is neither permanent nor current address, a new proof of address would be required within three months.

In case of opening an account in another bank, however, you would have to undergo KYC exercise afresh.

5. Is there any difference between such ‘small accounts’ and other accounts

Yes. The ‘Small Accounts’ have certain limitations such as:

• Balance in such accounts at any point of time should not exceed Rs 50,000
• Total credits in one year should not exceed Rs.1,00,000
• Total withdrawal and transfers should not exceed Rs.10,000 in a month.
• Foreign remittance shall not be allowed to be credited into the account

Such accounts remain operational initially for a period of twelve months and thereafter, for a further period of twelve months, if the holder of such an account provides evidence to the bank of having applied for any of the officially valid documents within twelve months of the opening of such account. The bank will review such account after twenty four months to see if it requires such relaxation.

6. Is introduction necessary while opening a bank account?

No, introduction is not required.

7. For which banking transactions do I need to quote my PAN number?

PAN number needs to be quoted for transactions, such as, account opening, transactions above Rs.50,000 (whether in cash or non-cash), etc. A full list of transaction where PAN number needs to be quoted can be accessed from website of Income Tax Department at the following URL: Click here

8. What is the validity of cheques/drafts/pay orders/banker’s cheques ?

Payment of cheques/drafts/pay orders/banker’s cheques, if they are presented beyond the period of three months from the date of such instruments, shall not be made.

What is e-KYC

What is e-KYC? How does e-KYC work?

e-KYC refers to electronic KYC. e-KYC is possible only for those who have Aadhaar numbers. While using e-KYC service, you have to authorise the Unique Identification Authority of India (UIDAI), by explicit consent, to release your identity/address through biometric authentication to the bank branches/business correspondent (BC). The UIDAI then transfers your data comprising name, age, gender, and photograph of the individual, electronically to the bank/BC. Information thus provided through e-KYC process is permitted to be treated as an ‘Officially Valid Document’ under PML Rules and is a valid process for KYC verification.

Accounts opened using OTP based e-KYC, in non-face-to-face mode are subject to the following conditions:

1. There must be a specific consent from the customer for authentication through OTP.
2. the aggregate balance of all the deposit accounts of the customer shall not exceed rupees one lakh. In case, the balance exceeds the threshold, the account shall cease to be operational, till CDD as mentioned at (v) below is complete.
3. the aggregate of all credits in a financial year, in all the deposit accounts taken together, shall not exceed rupees two lakh.
4. As regards borrowal accounts, only term loans shall be sanctioned. The aggregate amount of term loans sanctioned shall not exceed rupees sixty thousand in a year.
5. Accounts, both deposit and borrowal, opened using OTP based e-KYC shall not be allowed for more than one year within which identification as per Section 16 is to be carried out.
6. If the CDD procedure as mentioned above is not completed within a year, in respect of deposit accounts, the same shall be closed immediately. In respect of borrowal accounts no further debits shall be allowed.
7. A declaration shall be obtained from the customer to the effect that no other account has been opened nor will be opened using OTP based KYC in non-face-to-face mode with any other RE. Further, while uploading KYC information to CKYCR, REs shall clearly indicate that such accounts are opened using OTP based e-KYC and other REs shall not open accounts based on the KYC information of accounts opened with OTP based e-KYC procedure in non-face-to-face mode.
8. REs shall have strict monitoring procedures including systems to generate alerts in case of any non-compliance/violation, to ensure compliance with the above mentioned conditions.

Source: Reserve Bank of India