What are the Ways for KYC Verification? Know more About KYC and its Verification Process

KYC, or ‘Know Your Customer’, is a verification process mandated by the RBI to allow financial institutions to verify the authenticity of their customers. Customers must submit their identity and address proof as KYC documents when entering a financial transaction with any financial institution.

KYC verification is an important process for financial institutions to authenticate the identity of their customers, online or offline, and prevent fraudulent transactions under false identities.

In this article, we’ll discuss the importance of the KYC process, different ways of verification, and why you need to update your latest KYC details.

Importance of the KYC process

KYC is a simple, one-time process for financial institutions and customers to ensure the integrity of financial transactions. Here’s why you need to complete the KYC process as mandated by the RBI-

1. To ensure the legitimacy of customers

For financial authorities, KYC is an easy way to authenticate an individual’s identity through their identity, address, or business documents. Further, since many non-individual customers use financial services, such as trading platforms or mutual funds, financial bodies have the right to verify the legal status of such entities.

2. To prevent fraudulent transactions

KYC is a crucial process for monitoring and preventing any fraudulent transactions. Once they verify the customers’ identity, financial institutions can monitor their transactions effectively and detect and report suspicious activities.

3. To ensure compliance with regulations

KYC is an essential regulation introduced by the RBI to ensure transparency in financial transactions and prevent illegal activities. Businesses and individuals must comply with these regulations to avoid penalties.

What are the different ways of KYC verification?

The KYC verification process is typically conducted online and offline, depending on the policies of the financial institution.

A. Online KYC verification process

When you apply for a new credit card a loan, or invest in mutual funds online, financial institutions allow you to complete the KYC process online. This is typically Aadhaar-based KYC that can easily be completed from the authority’s website or mobile banking app, where you need to upload a scanned copy of your Aadhaar card.

While the online process can vary from one financial body to another, here’s the standard process-

1. Visit the official website of the financial institution.
2. Log in using your mobile number and enter the OTP received.
3. Fill in the relevant application form with your personal and banking details.
4. Upload a self-attested copy of your Aadhaar card.
5. Accept the terms and conditions.
6. Once the document is uploaded, the financial body will verify it digitally.

B. Offline KYC verification process

The offline KYC verification process requires you to visit the physical branch in person and submit hard copies of the necessary documents.

1. Visit the official website of the lending or financial institution and download the KYC application form.
2. Fill in the form with personal details, including your PAN and Aadhaar card.
3. Visit the financial institution’s nearest branch and submit the KYC form and the necessary identity and address proof documents.
4. the KYC process will be complete once the documents are submitted.

When is KYC required?

Here are some examples of financial activities where you need to submit your KYC documents-

1. Opening a bank account
2. Investing in mutual funds or other investment instruments
3. Opening an account on online payment platforms and digital wallets
4. Applying for a loan or credit card
5. Buying an insurance policy

Important KYC documents

Here are the standard documents you need to complete the KYC verification process-

1. Passport
2. Driving License
3. Voter’s Identity Card issued by the Election Commission of India
4. Proof of possession of Aadhaar Number
5. Job card issued by NREGA (National Rural Employment Guarantee Act) issued by State Government Officer
6. Letter issued by National Population Register containing name and address

Why should you update your latest KYC details?

In most cases, KYC verification is a one-time process. However, RBI’s Master Direction for KYC Direction, 2016, updated on May 4, 2023, requires financial institutions to regularly update the customer’s KYC details.

This ensures that the information is updated for security and prevents illegal or fraudulent financial transactions with outdated details.

You will need to update the latest KYC details in the following scenarios-

1. If you have legally changed your name on the Aadhaar card and PAN card, you need to submit the updated copies to redo the KYC process.
2. Re-KYC is mandatory for minor accounts who have turned major.
3. If you have shifted to a new place, you must update the address in all your ID proofs. Hence, you must also update the Aadhaar and PAN cards and redo the KYC verification process.

How to update your KYC online?

The KYC update process is simple and can be completed online within a few minutes. Here’s how you can do it-

Step 1: Log in to the online KYC portal using your credentials.

Step 2: Navigate to the “Update KYC” option.

Step 3: You will find a set of preferences to update the KYC details.

Step 4: Click on the preference where you want to make a change and upload the scanned copies of the updated documents.

Step 5: For instance, if you are updating your address, upload proof of the relevant address with the updated details.

Step 6: Enter the relevant fields with the necessary details and the OTP received on your registered mobile number to proceed with the verification process.

Step 7: Submit the application.

Once the application is submitted, the authorities will review the KYC details, and you will receive an official update.

To wrap up

KYC is an essential verification process that is required when you want to carry out any financial transaction with a lending or financial institution. KYC verification allows financial authorities to acknowledge their customer’s authenticity and prevent illegal transactions.

Moreover, customers must update their KYC details regularly in case of changes to their ID or address documents to maintain the security and integrity of financial transactions.

With Tata Capital, you can apply for loans through a simple online application and KYC verification process.