What is KYC: All You Need to Know

If you are wondering about what is KYC, then it is an acronym whose full form is 'Know Your Customer.' KYC makes it easier for an institution to authenticate its consumer identity and address details.

Essentially, the meaning of KYC is to establish an individual's identity and address through relevant supporting documents, including photo IDs (for example, PAN card, Aadhar card), In-Person Verification (IPV) and proof of address.

As explained above, KYC compliance is a mandatory exercise under the Prevention of Money Laundering Act, 2002. Furthermore, the Know Your Customer (KYC) process is generally divided into two parts:

• Part I comprises the necessary KYC details of an individual as recommended by the Central KYC registry (this is known as Uniform KYC)
• Part II, wherein any additional KYC information is sought separately by the financial intermediary (this is known as Additional KYC)

As per the guidelines issued by the Government of India, some key documents serve as 'Officially Valid Documents (or OVDs) and can be considered for the verification of identity. Even if you have already submitted the KYC documents once to an institution, they may ask again for the documentary proof to periodically update the KYC records. If you are an Indian National, the following are the documents accepted as proof of address and proof of identity for the KYC process :

• Aadhaar Card
• Voter ID Card Issued by Election Commission of India
• Driving Licence
• Passport

Once you know what is KYC and when is it necessary, you should be aware of the different types of KYC available in India. Let us take a look at different types of KYC:

• Aadhaar based KYC (eKYC)
• Offline KYC or In-Person-Verification (IPV) KYC

Using the Aadhar based KYC, you will be only able to make mutual fund investments of Rs.50000 per year. If you want to invest more than Rs.50000 per financial year, you will be required to complete the offline In-Person KYC as well.

Also Read: What is HRA?

You can do Aadhaar based KYC and offline KYC by following the steps mentioned below:

As mandated by the Reserve Bank of India, completing the KYC process is essential. All financial institutions such as banks and life insurance companies have detailed KYC forms that help capture crucial customer information, including their names, contact numbers, addresses and bank details. Therefore, you must make sure that your KYC process is complete with the concerned financial institution so that you can start using their services without any hassles.