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RBI's KYC Norms For Bank Accounts Demystified

Complying with the KYC (Know Your Customer) norms is often a big pain. As such, most people hate their bank's (repeated) KYC verification process.

Fortunately, this need not be the case.

All it requires is the RIGHT information about the whole KYC process; and the inconvenience experienced by most customers would become history.

In this blog post, you will know (almost) everything you need to know about the 'Know Your Customer' rules, in just 21 brief key points.

[Note : Since the bank staff is sometimes ignorant of the amendments, you can point out these latest rules and ease your KYC updation.] 

One. The simple aim of the KYC process is to know the customer's (a) identity and (b) address. That's it. Nothing more. Nothing less.

Two. KYC verification is required (a) at the time of opening the bank account and (b) at regular intervals thereafter.

Three. Only three things — Proof of Identity, Proof of Address and Photograph — are sufficient to open a bank account.

Four. Six 'Officially Valid Documents' for Proof of Identity are... Passport, Driving Licence, Voters’ Identity Card, PAN Card, Aadhaar Card and NREGA Card. You have to furnish just one of these.

Five. If the above document(s) also has your address, then it serves as your 'Proof of Address' too.

Six. If not, you have to submit any other Officially Valid Document that contains your address.

Seven. IMPORTANT Many people, such as transferred employees and migrating workforce, often have a problem furnishing proof of their current address. As per modified KYC rules, proof of your "permanent" address and a simple declaration of your "current" address would suffice.

Eight. As an exception, banks can at their discretion open your account even without the officially valid documents, provided you furnish
(i) an identity card with your photograph, issued by Central / State Government Departments, Statutory / Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks and Public Financial Institutions;
(ii) a letter issued by a gazetted officer, with your duly attested photograph

Nine. If you cannot furnish any of the document(s) specified for proof of identity / address, you can still open a bank account. This, however, will not be a normal account. Instead, it will be designated as "Small Account". This will be valid for 12 months, giving you enough time to arrange for the required document(s).

Ten. Small Accounts have certain restrictions viz.
- balance at any point of time should not exceed Rs.50,000
- total credits in one year should not exceed Rs.1 lakh
- total withdrawal and transfers can be maximum Rs.10,000 in a month
- foreign remittances will not be credited to such accounts

Complying with RBI's KYC norms is not as difficult as it appears to be.

Eleven. IMPORTANT Unlike in the past, "introduction" is no longer necessary to open a bank account. Documentary proof is sufficient.

Twelve. Once you are KYC compliant, you don't have to resubmit any proof when opening additional accounts with the same bank.

Thirteen. KYC is mandatory even for Credit / Debit Cards, purchaser of Gift Cards and Add-on Cards.

Fourteen. As mentioned above, KYC verification is required not only at the time of account opening, but thereafter too at regular intervals. How frequently this would happen, depends on whether you have been categorized as a "low, medium or high" risk customer by your bank.

Fifteen. For 'high risk' customers, KYC verification needs to be done at least every two years. This period is eight years and ten years for 'medium risk' and 'low risk' customers respectively.

Sixteen. IMPORTANT Low risk customers need not be physically present at the bank to complete the KYC updation process. If there is any change in their address, they can simply send a certified copy by post. In cases of no change, a self-certification will do.

Seventeen. Minor account holders have to submit a photograph upon turning major.

Eighteen. If you do not comply with the KYC updation process, banks have the right to "partially freeze" your account or even close the same. Under 'partial freeze' only credits to the account are allowed, while debits are not permitted.

Nineteen. Before partial freezing banks will give you a due notice of 3 months, which may be extended for another 3 months after issuing a reminder. Partially-freezed account can continue for 6 months thereafter, when it would be converted into an "inoperative account" (i.e. no credits or debits would be permitted). 

Twenty. Nowadays, if you have an Aadhaar Number you can also do electronic KYC (e-KYC). This requires you to authorize UIDAI (through a bio-metric authentication) to share your details with the bank. Information so received by the bank would be considered as "officially valid" for KYC purposes. 

Twenty One. For various transactions above a sum of Rs.50,000, PAN is a mandatory requirement. As such, you must ensure that your bank account details incorporate your PAN too, by submitting a copy of your PAN Card.

That's it!

Now that you know how simple is the KYC verification process, you will not find the same cumbersome and irritating.

An Investment In Knowledge Pays The Best Interest ~ Benjamin Franklin

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