What is KYC - Meaning, Documents Required & Its Types

KYC, or “Know Your Customer”, is a process used by businesses or financial institutions to verify the identity of their customers or clients. KYC aims to prevent identity theft, fraud, money laundering, and other illegal activities. During KYC, individuals or entities are required to provide certain information and documents to confirm their identity. This may include personal information such as name, address, date of birth, and government-issued identification like an Aadhar Card, passport or driver's license. In the context of financial services, KYC is a crucial step in establishing and maintaining a customer relationship. It helps organizations assess the risk associated with a customer and ensures that they are in compliance with relevant laws and regulations.

The Reserve Bank of India (RBI) has mandated that all financial institutions must conduct customer identification procedures involving the collection of documents and their verification for legitimacy.

KYC meaning and its types

KYC procedures involve the authentication and verification of a customer's identity and address details prior to accessing any financial services. Financial institutions establish the customer's identity and address by reviewing the submitted documents. The KYC process is prevalent in industries such as banking, finance, insurance, and other sectors where customer identification and verification are essential for legal and security reasons. KYC compliance is often a regulatory requirement, and businesses are obligated to follow these procedures to ensure that they are not facilitating criminal activities. There are two distinct types of KYC processes: Aadhar card-based verification and in-person verification.

What is KYC online verification?

You can accomplish your online KYC verification through two methods: Aadhar-based biometric verification or Aadhar OTP. Opting for Aadhar OTP ensures swift completion of your KYC verification within a few minutes. The following steps outline the process for online KYC verification.

• Go to the official website of KRA, which is the KYC registration agency.
• Log in to the website and enter your registered mobile number.
• Enter the OTP received on the registered mobile number.
• Make a self-attested copy of e-Aadhar and upload it.
• Accept the terms and conditions.

If you are opting for an Aadhar-based biometric KYC, you need to follow certain steps.

• Log in to the KRA website with your registered mobile number.
• Enter the OTP.
• Select the biometric authentication online option.
• Wait for an authorised representative to visit your address.
• Show your original documents and wait for the approval.

What is offline KYC verification?

For an offline KYC verification, you have to follow certain steps, which are as follows:

1.Download the KYC form.

2.Fill in all the required details.

3.Attach all the necessary documents, such as ID and address proof.

4.Visit the KYC registration agency and submit the form.

5.Complete the bio-metrics if required.

6.You can check your KYC status online.

The only problem with the offline verification process is it takes around 7 days to get verified. But if you are looking for a faster process, you can always opt for aadhar-OTP verification, as it takes only a few minutes to complete the process.

List of documents required for KYC

There are a few documents which are made mandatory by the government and are required for KYC verification. They are divided into two categories - Proof of Identity and proof of address.

For Proof of identity following documents are needed:

• Aadhar card, Pan card, Passport, Driver’s License.
• ID card issued by any central/state department or statutory/regulatory authorities.
• ID cards issued by banks and public financial institutions.
• ID cards issued by colleges affiliated with universities.

For address proof following documents are needed:

• Bank statements or passbooks.
• Passport, voter ID-card, ration card, lease agreement, maintenance bills.
• Utility bills such as electricity or gas bills less than 3 months old.
• ID card with address on it.
• Proof of residence issued by gazetted officers, multinational banks, bank managers, parliament, and notary public.

The specific time period for a KYC check can vary depending on the policies and regulations of the organization conducting the check. KYC checks may be conducted periodically to ensure that customer information is up-to-date and that any changes in the customer's status or risk profile are taken into account. High-risk customers can be asked to update their KYC every two years, whereas medium-risk customers can do this every eight years. Low-risk customers can update their KYC every 10 years.

KYC update is mandatory, and if you have not done it yet, do it at the earliest to avail exciting personal loan offers from IIFL finance. Seize the opportunity to make your dreams come true—submit your personal loan application today!