Why is KYC necessary for banks?KYC has become an integral part of the banking process. Any applicant has to submit his KYC documents to open or manage accounts with a bank. Banks also promote KYC submission because of the following reasons:
• The primary objective for KYC submission is to prevent banks from being used as the medium for money laundering
• KYC does not allow defaulters to open fictitious/benami accounts
• KYC also helps banks in proper risk management by assessing the account holder’s financial conditions before sanctioning the loan
• It also helps in checking that the applicant does not have a criminal background or is not associated with any terrorist organisation or banned anti-social groups
Important points mentioned in the RBI Circular• Earlier, KYC documents included Permanent Account Number (PAN), Officially Valid Documents (OVD) and a recent passport-sized photograph
• As per the new Customer Due Diligence (CDD) convention laid down by the RBI, an applicant has to provide the following:
• Aadhaar number
• Form 60
Aadhaar will be the only acceptable proof for identity and address
All other OVDs have been revoked by the chief banking regulatory
This new procedural update is expected to provide a trusted banking environment after the recent banking frauds
Aadhaar shall not be asked from non-residents i.e. those applicants who do not reside in India as they are not eligible for an Aadhaar card
Non-residents have to furnish PAN or Form 60, one recent passport-sized photograph and an OVD containing the proof of identity and address of the applicant
The circular will however be effective only after the apex court gives a judgement in favour of the constitutional validity of Aadhaar
In case the Supreme Court decides otherwise, the circular will be rendered null and void
Officially Valid Documents (OVD) accepted by banksBanks accept a set of documents as the proof of address or identity for KYC. These documents are as follows:
• Voter’s Identity Card
• Driving License
• Letter issued by the National Population Register (NPR)
• MGNREGA Job card duly signed by the State Government officer
People exempted from submitting Aadhaar for KYCRBI has exempted some people from furnishing their Aadhaar for KYC compliance. The list includes people from:
• Jammu and Kashmir
• People not residing in India
Such people do not have to submit Aadhaar or proof of Aadhaar enrollment. According to the new RBI guidelines, the bank may accept the KYC of such customer in the form of OVD and a recent photograph. However, this OVD should mandatory contain the address and identity of the applicant.
What to do if Aadhaar does not contain the updated addressThere are instances when a person relocates from the address mentioned in the Aadhaar card to a new place. In such a case, you can simply get your new address updated in Aadhaar. UIDAI allows people to update their address online as well. You just have to mention your complete address at the Self-Service Update Portal (SSUP) and submit the softcopy of the document proof. You can also update your address in Aadhaar card by visiting a nearby Aadhaar Enrollment Center.
Alternatively, RBI allows applicants to submit an address proof in addition to Aadhaar. Any of the following documents can be submitted by the applicant as the current address proof:
• Utility bill not more than 2 months old (Water bill, telephone bill, postpaid mobile connection, electricity bill, piped gas connection, etc.)
• Receipt of the property or municipal tax
• Pension documents
• Pension Payment Orders (PPOs) issued to retired employees
• Letter of allotment of accommodation from Central/State Government
Linking bank accounts with AadhaarThe government had made it mandatory to link existing bank accounts with Aadhaar. The deadline for linking was extended multiple times by the government to allow all account holders to link it within the stipulated time-frame. However, the Supreme Court has extended the Aadhaar-bank account linking deadline indefinitely.
How to link Aadhaar with bank accountsVarious banks have made adequate provisions to allow their account holders to link bank accounts with Aadhaar. An account holder can perform this task through net-banking, mobile banking, SMS banking, phone banking, online link, through ATM or by visiting the branch as well.
An account holder has to share his 12-digit Aadhaar number with the bank. The bank registers the request and verifies the details provided by the applicant. Once authenticated by UIDAI, the bank links the account with Aadhaar of the applicant. A confirmation message is sent to the registered mobile number of the account holder.
In case you want to open a new bank account, you do not have to follow any of the above procedures. You just have to furnish your Aadhaar at the time of opening the bank account. Your account will be linked with Aadhaar instantly.
The guidelines set by the RBI have been released after the central government decided to upgrade the Prevention of Money Laundering Act (PMLA) in 2017. The centre would issue a fresh deadline for linking the bank account with Aadhaar after the apex court gives a verdict in this connection. Even though it is still not mandatory to link your bank account with Aadhaar but it is best advisable that you link it beforehand to prevent from last minute hassles.