What is the Full Form of KYC

Aug 22, 2022, 16:45 IST

Full form of KYC

KYC is short for Getting to Know Your Customer. This is the process of financial institutions across India use it to obtain their clients' information. Like any other financial decision made by the government in India, this approach was introduced by the Reserve Bank of India. Over time, the launch of this program has helped the RBI prevent fraud in India, such as money laundering, identity theft, etc. You may have experienced KYC registration while using UPI applications such as Google Pay, Paytm, etc. The RBI has made KYC a mandatory process for all financial institutions and digital payment institutions over the past year. Apart from banks, this system is also used by insurance companies that include customers making transactions.

Full form of KYC

History of KYC

Financial crime has always been a problem in Indian history. It has led to such activities as drug trafficking, terrorism, and even mob crimes. KYC was introduced to reduce this crime in India. Prevention of Money Laundering Act was passed in 2002. KYC complied with the Financial Action Task Force. The team developed KYC guidelines for banks to follow. This high level of KYC compliance will help the government introduce a unified KYC.

The Reserve Bank of India launched KYC in 2002. This was compulsory for all banks to follow in 2004. The KYC committee was led by a former SEBI official, MR. Damodaran, under the supervision of the RBI.

Documents Required For KYC

In India, to perform a financial transaction, one must update their KYC. To create a KYC, one must submit a set of documents. According to government-issued guidelines, these documents confirm Indian identity.

  • Identity Card issued by colleges
  • Passport
  • Voter ID Card
  • Driving License
  • UID (Aadhaar card)
  • Verification of Aadhar number
  • Consumer Gas Bill
  • House Purchase Deed

Mandatory​ Documents:

  • PAN Card

Documents to Verify Income:

  • Income Tax Returns
  • Salary Slips
  • Bank Statement

Importance of KYC

KYC is important because it helps the bank clerk verify that the application and other details are correct. There have been incidents of theft and money laundering of accounts funds. It will help to prevent fraud by maintaining individual identity. The Know Consumer method has been popular for many years now. This is a must, and everyone should listen if they decide to open an account. It is impossible to open a bank or mutual funds account without completing the KYC process.

Where KYC Is Required

  • Banking services include opening bank accounts, making investments such as fixed deposits, recurring deposits, etc.
  • Mutual funds and Life Insurance investors must make a KYC registration to ensure that a person is buying.

Types of KYC

KYC is of two types which is mentioned below:

Aadhar-based KYC: This Aadhar-based KYC verification process is done online. It is not easy for those who cannot travel but have an internet connection. In this type of KYC verification, all one has to do is download the scanned version of the Aadhar card.

Personal KYC Verification: Offline visit to the nearest cybercafe is required for this person to perform this KYC verification. This type of KYC verification is complete. Personal KYC verification would usually require individuals to verify their identity through biometrics. If someone cannot go to the KYC cybercafe, they need to call the KYC registration agency and get an executive at home.

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