Every time you approach a financial institution for a transaction or procedure, the first process that you need to undergo is the KYC (Know Your Customer) norms. It is important and mandatory by law. Therefore, it is vital to understand what it means, how to undergo it, and what essential documents are required. Furthermore, quick and successful KYC verification will lead to faster and wider access to financial products such as life insurance! So, let us get started to know what it means right here!
What is KYC?
KYC refers to Know Your Customer. It is a process of personal identification and addresses verification of all the customers by institutions such as the banks, insurance companies, etc., before or while transacting with their customers. Simply speaking, it is a way to authenticate the customer's identity and address details.
The Reserve Bank Of India has declared it mandatory for all financial institutions, banks, digital payment corporations that engage in financial transactions. The KYC compliance and mandatory rules are stated in the Prevention of Money Laundering Act, 2002. It has been divided into two parts:
- Uniform KYC(Part I) - Comprises the required KYC information of the individual recommended by the Central KYC Registry.
- Additional KYC(Part II) - Comprises any additional KYC details required by the financial intermediary separately.
Why is the KYC Process Required?
KYC is important for opening or conducting financial transactions in India. However, the KYC completion varies based on the perception of risk in the case of a bank. It helps ensure that the details collected and the application received is from a trusted customer. Therefore, banks need to take KYC seriously to predict, understand and prevent fraud.
And in the case of life insurance, companies need to take up life KYC seriously to ensure that real customers take up the investments. Moreover, it helps curb black money fraud and other related malpractices that affect the credibility of important financial transactions prevailing in the country.
So, suppose you are purchasing a life insurance policy. In that case, you have to go through the KYC procedure managed by a KYC Registration Agency according to the rules and regulations laid by the Insurance Regulatory and Development Authority of India (IRDAI) and the Securities and Exchange Board Of India (SEBI).
What are the Important KYC Documents?
KYC Documentation is a simple process provided you have the necessary valid ID proofs ready. According to the guidelines issued by the regulatory bodies in India, there are a few Officially Valid Documents that serve as Proof of Identity and Proof of Address.
Proof of Identity
The Unique Identification Number includes Aadhar, Driving License, Passport, and Voter ID.
Permanent Account Number (PAN) card
Photo identity card or document issued by any Statutory or Regulatory Authorities, Central or State Governments, and their Departments.
Identity cards issued by Public Sector Undertakings, Public Financial Institutions, and Scheduled Commercial Banks.
Identity cards issued by colleges affiliated with Universities and professional bodies include ICAI, ICWAI, ICSI.
Proof of Address
Passport, Ration Card, Driving License, Voters Identity Card, Flat Maintenance Bill, Insurance Copy, Registered Sale, or the Lease Agreement of residence.
Utility bills include telephone bills(landline), gas, or electricity bills(not more than three months old).
Self-declaration by the Judges of the Supreme Court or the High Court with the new address mentioned.
Bank account statement or Bank Passbook Entries. However, it should not be more than three months old.
Proof of residence issued by the following institutions:
Scheduled commercial banks and their managers
Multinational Foreign Banks
Elected representatives to the Legislative Assembly
Documents issued by Government or Statutory Authorities
Identity cards or documents issued by Central or State governments and their Departments, Statutory or Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, Public Financial Institutions, Colleges affiliated to Universities or Professional Bodies, and Bar Council to their members.
Types of KYC in India
Once you know the meaning, requirements, and documents for the KYC verification process, it is important to know how to do it. There are two different types of KYC in India:
Online KYC (eKYC) or the Aadhaar Based
Offline KYC or the In-Person Verification
For investments upto ₹50,000 per financial year, the eKYC would suffice. And, for all other investments exceeding ₹50,000, you may have to undergo the Offline KYC process.
Here are the necessary steps to do KYC in India.
Visit the official website of the KYC Registration Agency and fill in your details such as name, address, date of birth, etc.,
Create your account by providing the Aadhaar card number and the registered mobile number. Verify the details using the One Time Password.
Self-attest e-Aadhaar and upload it after accepting the consent declaration terms and conditions for the e-KYC process.
Download the KYC application from the Insurance company or the bank and fill in the details.
Sign and submit the physical copy of the KYC document to the concerned authorities.
When submitting the KYC form, ensure to attest photocopies of the address proof, ID proof, and the recent passport size photographs.
At Tata AIA Life Insurance, we help you purchase life insurance policies by following a seamless process. You can do it online at the convenience of being at your house. Our executive support team will answer your queries and provide the necessary assistance. When you purchase the Tata AIA life insurance, you can modify the features if necessary at different stages in your life to ascertain maximum protection.
KYC is an important verification process to engage in financial transactions and purchase financial documents in India. It is done to validate your proof of identity and proof of address. According to the government guidelines, there are a few Officially Valid Documents that the financial institutions accept. Therefore, to open a demat account, purchase a life insurance plan, or use mobile digital wallets, KYC is mandatory. Get it done online or offline based on the requirements for quick processing and related benefits!