In light of the pandemic, the RBI has come to the rescue of bank account holders. Regulated entities are being advised by the central bank that for customer accounts where periodic KYC (know your customer) updating is due / pending, no punitive restriction on operations of customer account(s) shall be imposed till December 31, 2021. Account holders are expected to update their KYC during this period.
Due to the rise in COVID-19 cases and the resultant lockdowns in various states it’s now not possible for customers to visit bank branches and complete the KYC. Recently, the State Bank of India (SBI) announced that it will allow customers to submit their documents for purpose of updating their KYC details, via email or post. Today, the Reserve Bank of India (RBI) has stepped in and announced string of initiatives to enhance video KYC for customers.
Present updating process for KYC of individual account holders
Banks insist on updating KYC for account holders periodically. They need to visit to their bank branch along with a set of self-attested documents, which include proof of identity and proof of address. Then, they need to stand in a long queue for submission of these documents so that their bank account remains active. If the customer misses the last date for updating the KYC, then the bank would freeze the account.
Digital channels are now allowed for KYC
The RBI has now allowed the use of digital channels for the purpose of periodic updation of KYC details of customers. This includes video-KYC and submission of electronic documents through digilocker to the financial institutions for verification purpose.
“Now, the option to update KYC digitally will simplify it for consumers,” says Parijat Garg, a digital lending consultant.
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Video-KYC extended to new categories of customers
In relation to KYCs, RBI in January 2020 allowed video based customer identification process for customer on-boarding by regulated entities of RBI. This was primarily done to leverage technology and allow remote on-boarding.
Through today’s announcement, the ambit of RBI’s previous notification has been increased. Now, video KYCs have been expressly allowed for small businesses, legal entity owners, chartered accountancy firms and proprietorship firms. “Even authorized signatories, i.e., when you sign some regulatory / legal documents or file annual tax return, video KYC can now be used as a substitute,” says Kunal Varma, CBO and Co-Founder of MoneyTap.
“Previously, this facility was made available by the regulated entities for individual accounts only,” says Anjan Dasgupta, Partner at DSK Legal.
Conversion of limited KYC accounts to fully KYC-compliant ones
Financial institutions were opening accounts through Aadhaar e-KYC as partially / limited KYC accounts. In such accounts, lender would issue credit for only up to Rs 60,000 if you apply for a loan. To complete the full KYC of such accounts, the customer has to visit the branch for submitting physical documents or undergo biometric KYC process at the branch. It’s impossible to complete the full KYC in those methods due to lockdown in multiple states. So, now, the central bank has allowed the conversion of partial KYC accounts opened in the past into a full KYC compliant account. This can be done through video KYC without undergoing additional biometric or physical KYC process. “Now, the customers can unlock additional benefits on their fully KYC compliant accounts with the financial institutions because of use of video KYC,” says Varma.
Allowed submission of electronic documents for KYC
Now, the central bank has enabled submission of identity documents issued through DigiLocker to the financial institution for completing the KYC process for new account opening or updating KYC of existing account holders.
A customer can upload the authenticated document on digilocker and financial institutions can download from it. A customer need to share the secured link of documents saved on digilocker. The bank will download from it and complete the KYC process.The responsibility for safe and secure storing of the customer information shared through digital channels will remain with the regulated entities. “The regulated entities will have to ensure they use latest technology like artificial intelligence (AI) to protect customer data and identity in digital KYC process,” says Dasgupta.