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Govt may implement Uniform KYC in Banks & LIC, Know about this new KYC rule


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In a recent meeting led by Finance Minister Nirmala Sitharaman, a proposal was presented for a standardized know your customer (KYC) process. The new system aims to streamline customer verification and facilitate the sharing of data between financial institutions.

What is Uniform KYC?

Uniform KYC refers to a standardized process for verifying customers’ identities and information across different financial institutions. It is designed to address the challenges and shortcomings of the current KYC practices.

Challenges with the Current KYC System

The current KYC practices in India are not user-friendly or secure. The process is mandatory for various financial activities such as opening a bank account, investing in the stock market, or purchasing a life insurance policy. However, the process is often complex and cumbersome.

According to Paritosh Desai, Chief Product Officer of IDfy, a digital onboarding platform, the complexity arises from the need for financial institutions to know their customers and the constant attempts by fraudsters to exploit the system.

There are three main issues with the current KYC system:

  1. Expense: Financial institutions have to continually update their systems and processes to comply with KYC guidelines, which can be costly.
  2. Obtrusiveness: The current KYC norms require customers to submit the same documents to multiple lenders, creating a paperwork burden and inconvenience for borrowers.
  3. Inflexibility: The current process lacks flexibility, as banks and institutions cannot tailor the KYC process based on the risk profile or history of the customer. This can result in a suboptimal user experience and lower customer satisfaction.

The Benefits of Uniform KYC

The proposal for uniform KYC aims to address these challenges and provide several benefits:

  1. Simplicity: Financial institutions will be able to verify customers through a simplified process, using digital KYC records that can be shared across the financial sector. This eliminates the need for customers to undergo multiple KYC processes.
  2. Efficiency: The interoperability of KYC records will reduce the turnaround time for financial institutions, resulting in a more efficient process.
  3. Consumer Protection: Uniform KYC ensures consumer protection by enabling the utilization of verified information across multiple financial services.

Positive Industry Response

The proposal for uniform KYC has received positive feedback from industry experts. It is seen as a progressive measure to combat fraud while reducing friction for customers.

If the proposal is implemented, customers will no longer need to go through the hassle of verifying their KYC documents multiple times at different financial institutions. This will save time and improve the overall customer experience.

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