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Your complete guide to the what, why and how of KYC

Your complete guide to the what, why and how of KYC

If you are here to understand what KYC is, it’s all in the name. KYC stands for Know Your Customer. In finance this procedure is key and your familiarity with the concept is absolutely unavoidable. Whether you are opening a new bank account, creating a UPI ID, or taking out a loan with a digital lending company like SmartCoin, all service providers will typically ask for your personal details.  

What is KYC

KYC is a procedure that enables you to verify and authenticate your identity as a customer. The RBI has mandated that all financial institutions verify the identity and address of customers before engaging in any financial transactions with them. 

Why KYC is unavoidable

  • Ensures the elimination of all illegal financial activities 
  • Prevents fraudulent activities, identity theft, and money laundering, among others 
  • Enables better understanding to evaluate risks and serve customers effectively 

Documents you will need

Most institutions ask for the same set of documents from you to successfully complete the KYC process. These documents are called Officially Valid Documents (OVDs). 

  • Aadhaar Card
  • PAN Card
  • Passport
  • Driving License
  • Voter’s ID

Different Types of KYC

Here are the different ways or channels to be used to successfully complete your KYC:

Paper-based KYC

In case of submitting self-attested, physical copies of documents in person to complete KYC processes, will be known as paper-based KYC or in-person KYC.

Aadhaar-based eKYC

For this, the authentication is done remotely through data collected by the UIDAI. You can choose an OTP-based verification procedure where an OTP is sent to your Aadhaar-registered mobile number. You may also opt for biometric authentication in which case your biometrics will be used to verify your identity.

Offline KYC

As opposed to an in-person verification, you will have to download the Aadhaar paperless e-verification file and submit this for KYC authentication. You have to also share your consent for the information in this document to be used for verification.

Central KYC

The Government of India started this initiative to enable individuals to complete their KYC just once with the registered entity, after which the records will be added to the Central KYC registry (CKYCR) managed by CERSAI. This record will be used by other registered entities to get access to KYC information. A 14-digit code will then be generated to access this record.

Video KYC

True to its name, in this case, the KYC process will be completed using video aids. This came into being as a viable option once the pandemic-induced restrictions in banking came into play. An agent will take you through the process through a mix of video audio and AI technology.

Digilocker KYC

You may share KYC documents with the registered entity through your Digi locker account. Digilocker is a highly secure, cloud-based platform that stores your digital documents.

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