The directive by Reserve Bank of India allows the banks throughout the country to frame the legal and regulatory requirements linked with KYC or Know Your Customer. Know Your Customer has been developed by the Central Bank and employed by the Government of India in order to counter the menaces like money laundering, hoarding of black money, tax evasion, etc., the regulations that link the Customer's details to the PAN, can be used to access all the information regarding a person's financial transactions. Along with preventing online theft, KYC can also be used in order to avoid identity theft, which is an enormous problem these days. KYC provides the banks with the information regarding their customers so that the banks can easily track their customer's financial holdings and assess the risks linked with it.
KYC uses the customer's personal information to assess his/her financial status so that the bank can have an unbiased assessment of the risks associated with managing the customer's account.
KYC is mandatory in the following cases
KYC or Know Your Customer is based on the directives provided by the Reserve Bank of India. It is a system to keep a track of the financial transactions of an individual and is majorly used as a tool to prevent tax evasion. Since it is used for tracking the money trails of an individual, it could also be helpful in preventing money laundering, online identity theft or any other financial fraud which is inflicted electronically.
The 10-digit alphanumeric sequence, i.e, PAN is considered to be one of the major systems used for keeping track of an individual's finances, it is important to link PAN with KYC in order to get an overall view of the financial status of that person. PAN acts as a proof of identity of an individual, hence, one of the main documents that are required to verify the KYC process is PAN.
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What are the basic features of KYC?
Which documents are required for KYC? The documents required for KYC vary depending on the banks/financial institution, but, the common documents required for filing KYC are- PAN details, passport, Voter ID, Birth certificate, Driver's License etc.
You may also be required to provide colored passport-size photographs for added verification.
How can I acquire the KYC form? You can acquire the KYC form from your local broker or you can download the form from any mutual investment funds website.
I wish to change details in my KYC, what can I do? If the details that you wish to change are linked with your identity, you need to fill up the KYC form with your updated/revised details and submit it online.
What is the definition of 'Customer' according to KYC? A Customer is an entity who has a business or any other relationship with the bank.