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Know Your Customer (KYC) - Meaning, Requirement, Procedure & KYC Status Check

Updated on: 24 May, 2024 11:45 AM

KYC stands for "Know Your Customer." It's a mandatory process where businesses, especially financial institutions like banks and payment companies, verify the identity of their customers before offering them services. This is regulated by the RBI in India.

Need for KYC (Know Your Customer)

In today’s scenario, where all financial transactions are being entered into digitally, the need for KYC particularly e-KYC, is widespread. We have listed down some important areas where KYC is required.

  • Opening of bank accounts
  • While applying for loans or credit cards
  • Opening your locker
  • In mutual fund investment
  • To establish a new mobile connection
  • To change beneficiary or signatories

Available KYC (Know Your Customer) procedures

Know Your Customer compliance can be done via any of these modes, namely.

  • Offline Mode
  • Online Mode
  • Aadhar-based Biometric

KYC Check through Offline mode

  • You can download the KYC application form from CDSL Ventures Limited and fill in your details.
  • Then, you will have to sign and submit a filled copy of the form to the authorized person with whom you wish to invest in mutual funds.
  • Photocopies of the ID proof, address proof, and your passport-size photograph should be attached to the form and submitted.

KYC Check through Online Mode

  • Visit the official website of KRA and create your account
  • Fill in your personal details
  • Then, you will be asked to enter your registered mobile number along with your Aadhaar card number.
  • Then you will receive an OTP on your registered mobile number, which will be further used in verification.
  • Lastly, you need to upload a self-attested e-aadhaar copy.

Aadhar based Biometric

  • You can opt for Aadhaar-based KYC. For this, you can have an authorized person from the agency to visit you and collect your details.
  • You need to submit your Aadhaar copy to the authorized person
  • Then you will be asked to map your fingerprints on the scanner and then will be linked to the database
  • Your details will be generated by matching the fingerprint to the Aadhaar database
  • Now your KYC is validated

Role of PAN card in KYC

The primary purpose of KYC is to verify and document each individual’s identity. It is mandatory to possess a PAN card for all the income-earning individuals and non-individuals issued by Govt. of India. Its main purpose is to identify and verify the identity of the individuals before they perform any financial transactions. The Permanent Account Number is an important document required in KYC processing.

Documents required for KYC compliance

The following documents should be submitted along with the Know Your Customer application form and one passport-size photograph.

  • ID Proof– ID proof can comprise any one of the following: PAN Card, Driving License, Aadhaar Card, Voter ID, Passport Copy, or bank photo passbook.
  • Proof of address– You can show one of the following documents as your address proof-Recent electricity bill, Mobile or landline Bill, passport copy, latest bank passbook, voter ID, Aadhaar card, driver's license, or even your ration card.

How to Check KYC Status Online?

You can easily check the KYC status if you have submitted your KYC documents. All you need is to follow the steps mentioned below to track PAN KYC update status:

  • First of all, you have to visit the official website of CDSL at official website
  • Now, you have to enter either
    1. Your PAN number or
    2. Enter your name, DOB, and exempt category
  • Enter the valid captcha to proceed
  • Click on submit to check the status
  • A screen, as shown below, will open up. In case your KYC has already been verified then, the latest status will be shown as ‘MF- Verified by CVLMF’. If not, the status will be shown as ‘Pending’. MF- Verified by CVLMF
  • If you want, you can also take out the print of the checked KYC status.

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Frequently Asked Questions

Q- What is the importance of KYC?

KYC identifies fraud and prevents money laundering and other financial deception. It helps to understand customers better and carefully manage the financial risk.

Q- What are the documents required to complete the process of KYC?

ID proof and address proof, with the latest photograph, are the two mandatory documents required to complete the process of KYC.

Q- What do you mean by CDD in the KYC process?

Customer Due Diligence or CDD is the process of verifying the customer's background details to ensure that dealing with the customer is risk-free.

Q- Is there any difference exist between AML and KYC?

AML means Anti-Money Laundering, which is just a small part of the AML and CFT, i.e., Combating Financing Terrorism(CFT), whereas KYC (Know Your Customer) is the process by which businesses identify the client's authenticity.

Q- What do you mean by KYC onboarding?

It is the client onboarding solution that provides customer services and facilitates the KYC to adhere to the local as well as global regulation.

Q- What do you mean by KYC fresh?

KYC fresh helps the various bank to serve its customers in a much better way and manages the risks effectively.

CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.