What does KYC mean to a bank?

KYC stands for Know Your Customer. KYC norms regulate the collection of relevant information that your bank must obtain from you for the purpose of opening a bank account or doing business with you.

The objective behind KYC or Know Your Customer is to prevent money laundering, financial fraud and other fraudulent activities. This also helps the bank to understand their customer better and manage their risks prudently.

What does KYC mean to a bank?KYC has two components – identity and address proof. While opening your account or doing business with a bank you need to provide your identity and address proof to them.

While identity proof will remain same for the customer, address proof will change once you moved from one location to other.

In such kind of situations bank will ask you to submit documents for your new address.

Banks routinely may also ask you to comply with Know Your Customer norms if your account shows a drastic change in deposits or no change for a long time.

KYC norms are managed by the guidelines issued by RBI under banking regulation act. As per the guidelines, not only those who open accounts or doing business with a bank but also the beneficiaries are required to follow these Know Your Customer norms. Banks are also required to ask you for the address proof periodically based on the risk category of your account.

If you have provided your rent agreement as address proof then in addition to that you may be asked to provide electricity bill of your landlord or telephone bill just to establish your present address.

Opening account without KYC Norms

Account can be opened without KYC norms if you do not have any address or identity proof. To open an account without KYC, you need to get introduced by What does KYC mean to a bank?another account holder of the same bank who is already holding an account for 6 months.

However, under such circumstances, the person can not have a balance of Rs. 50, 000 in all his accounts and total credit for the year should not exceed Rs.1, 00,000.

In case this limit has been exceeded, the bank is required to get KYC compliance from the person or else no further transaction will be permitted. Bank is required to collect photograph and address proof which has to be certified by the introducer.

Know Your Customer or KYC norms are also applicable if you have applied for a credit card or add-on card or any other supplementary card.

If you do not comply with the KYC norms or bank is not satisfied with it then your account can be closed after issuing due notice to you. Recently RBI has imposed penalty on ICICI, HDFC and Axis bank for non-compliance to KYC norms. Axis Bank was fined 50 million ruppes where as ICICI and HDFC bank have been fined for 10 and 45 million rupees respectively.

If your bank sends you alert for KYC compliance then you can do so by resubmitting a self attested copy of PAN, identity proof, address proof and passport size photograph along with the KYC form. Know Your Customer form can be downloaded online from bank’s website or can be collected from the bank’s branch office.

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