State-run banks in India are planning to create a shared video-based Know Your Customer (KYC) system. This decision follows discussions with the government, which wants all financial institutions to fully digitize their KYC process. The goal is to connect these institutions with the Central Know Your Customer Registry (CKYCR). This integration will allow different financial institutions to share KYC records, reducing the need for customers to verify their details multiple times.
A Single Source of Truth for KYC
An official, who wished to remain anonymous, explained that CKYCR should become the “single source of truth” for all KYC records. This means it will act as a single, trusted database where financial institutions can verify customer details instead of asking for fresh documents. By creating a common video KYC hub, all public sector banks will be able to complete customer verification in a standardized and efficient manner. This will also make the process easier for customers.
Government’s Push for Full Integration
The government has asked all regulated financial institutions—including banks, insurance companies, and pension funds—to integrate their systems with CKYCR. This way, they can access verified KYC data directly instead of asking customers to submit new documents and undergo fresh verification.
“There is a strong need for financial institutions to directly connect with CKYCR and ensure that customer records are updated in real-time,” said the official.
Addressing Duplicate Records
Currently, many new KYC records uploaded to CKYCR are rejected because they already exist in the system. This duplication creates inefficiencies. By fully integrating CKYCR, the time taken to match and reconcile records—which now takes up to 10 days—will be reduced to nearly real-time.
The Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI), which manages CKYCR, is working with financial institutions to digitize the entire customer onboarding process. “Right now, verifying new customers takes time and money. If we fully digitize the process, it will be much faster and more cost-effective,” said another official.
Benefits for Customers and Fraud Prevention
A more advanced KYC system will also help in developing financial products like the Grameen Credit Score, which aims to promote financial inclusion for rural populations. Additionally, the system will help prevent fraudulent activities, such as the creation of mule accounts (fake accounts used for illegal transactions), said a banking executive.
Preventing Fraud with Verified Contact Details
Last year, an expert committee set up by the Department of Financial Services under the Finance Ministry recommended that financial institutions must verify a customer’s email and mobile number before uploading their details to CKYCR. This step will help prevent fraud and unauthorized access.
Future Plans: AI, Face Matching & DigiLocker Integration
In the Union Budget, Finance Minister Nirmala Sitharaman announced plans to simplify the KYC process and launch an improved CKYCR system by 2025. The government also plans to introduce a new system for periodic KYC updates.
To further enhance security and efficiency, the government will use Artificial Intelligence (AI) and face-matching technology to identify duplicate records and prevent fraud. Additionally, the CKYCR system will be linked with DigiLocker, allowing customers to complete their KYC digitally without needing to submit physical documents.
These improvements aim to make banking, insurance, and financial services more seamless, secure, and user-friendly for everyone in India.
