Know Your Customer (KYC)
KYC refers to the mandatory process by which financial institutions verify the identity, address, and risk profile of customers before establishing a business relationship. In India, KYC is governed by the PMLA 2002, RBI Master Direction on KYC, and regulations from SEBI, IRDAI, and PFRDA.
Documents Typically Accepted
Proof of Identity: Aadhaar, PAN Card, Passport, Voter ID, Driving Licence.
Proof of Address: Aadhaar, utility bills (not older than 3 months), bank statement, rent agreement.
PAN is mandatory for most financial transactions including bank accounts, mutual funds, and loans above certain thresholds.
KYC Modes
- •In-Person Verification (IPV): Physical document presentation to a bank or AMC representative.
- •e-KYC (Aadhaar-based): Uses UIDAI authentication (OTP or biometric) for instant electronic verification.
- •Video KYC (V-CIP): Introduced by RBI in 2020, allows KYC via live video call with a bank official.
- •Central KYC (CKYC): Managed by CERSAI, allows one-time KYC reusable across multiple financial institutions.
KYC in Mutual Funds
The KRA (KYC Registration Agency) system maintains a centralised repository. Once KYC is completed with any SEBI-registered intermediary, the record is shared across all participating institutions.
Periodic Updates
Regulated entities periodically re-verify customer information. High-risk customers may require updates every 2 years, medium-risk every 8, and low-risk every 10, per RBI guidelines.