Uniform KYC: The Financial Stability and Development Council (FSDC) has proposed implementing a uniform KYC system across the financial sector to streamline the customer verification process and reduce paperwork, time, and costs.
What Is Uniform KYC?
Uniform KYC aims to standardize the KYC process, enabling interoperability of KYC records across different financial intermediaries. This eliminates the need for customers to undergo KYC verification multiple times for various financial services.
Read More: Here’s How You Can Link Your Aadhaar With Your Bank Account
Current KYC Compliance
Currently, KYC involves verifying the identity and address details of customers before granting access to regulated financial products. Customers often have to submit KYC documents repeatedly when opening accounts or investing in different financial instruments.
Centralized KYC Registry
The Central KYC Records Registry (CKYCR), established in 2016, stores KYC records for the capital markets. While it streamlines KYC for capital market investments, it does not cover other financial services like banking and insurance.
Read More: Attention rail passengers! Several trains cancelled, diverted, rescheduled on THIS route – FULL LIST
Proposed Changes
Under the government’s proposal, customers will receive a unique CKYC identifier linked to their ID proof upon submitting KYC details. This identifier allows reporting entities to access KYC records from the central registry, reducing the need for redundant KYC processes.
Benefits for Customers and Institutions
Uniform KYC simplifies onboarding for customers, allowing them to enter into relationships with different financial institutions using a single KYC. This saves time, streamlines processes, and enhances security. For financial intermediaries, it improves onboarding efficiency and reduces operational costs associated with KYC verification.
Read More: 7 Tips To Assess Your Readiness Before You Invest In A Second Home
Ensuring Privacy and Security
While uniform KYC offers efficiency benefits, concerns about data privacy and security arise. Any data breach in the central registry could lead to misuse of thousands of records. However, centralized management of KYC records also enhances data security by eliminating the need for financial intermediaries to store customer data locally.
Transition to Risk-Based KYC
The finance ministery proposal for a risk-based KYC approach aims to simplify the process further. This approach allows for different levels of KYC verification based on the risk profile of customers, enhancing interoperability across the financial sector while ensuring adequate due diligence.
