What Is KYC? Why Banks Ask Customers to Complete Know Your Customer Verification

KYC is an essential process followed by banks, financial institutions and other regulated entities to verify the identity and address of their customers. It plays an important role in preventing financial fraud, money laundering and misuse of banking services.

What Is KYC?

KYC stands for Know Your Customer. It is a customer verification procedure used by regulated financial institutions to establish the identity of individuals and understand relevant aspects of their financial relationship.

In India, KYC requirements are governed by applicable regulatory guidelines, including the Reserve Bank of India`s KYC directions for regulated entities.

What Documents Are Required for KYC?

Depending on the type of account and applicable rules, customers may be asked to provide officially valid documents and other permitted information.

Commonly accepted documents include:

- Aadhaar, where legally permitted and subject to applicable requirements.

- Passport.

- Driving licence.

- Voter identity card.

- Other officially valid documents recognised under applicable regulations.

PAN or Form 60 may also be required for relevant financial transactions and account-opening procedures.

Different Methods of KYC Verification

Physical KYC: Customers submit documents and complete identity verification through the prescribed process.

e-KYC: Electronic identity verification is carried out through permitted digital systems.

Video KYC: Certain institutions allow customers to complete identity verification through a live video-based process, subject to regulatory requirements.

Why Is KYC Important?

KYC helps financial institutions verify customers, reduce identity-related fraud and meet anti-money-laundering obligations.

Customers should ensure that their KYC information remains accurate and updated. They should also avoid sharing OTPs, passwords or confidential banking details with unknown individuals claiming to offer KYC assistance.