KYC is also known as Know Your Customer. For the first time in 2004, the Reserve Bank of India made it mandatory for all Indian financial institutions to verify the identity and the addresses of all customers within the country to process their transactions. A customer’s personal information must be submitted to the financial institution before they are allowed to invest in any financial instrument. Financial institutions must complete KYC of their clients before they are allowed to conduct any financial transaction with them.
Importance of eKYC
The Know Your Customer (KYC) process is essential for protecting financial institutions and preventing illegal activity. Many non-individual customers take advantage of trading and investing in mutual funds. Using KYC, banks can cross-check the operating addresses of their customers and verify the authorised signatories of those customers. The KYC process also requires information about an individual’s occupation and their business nature, which provide useful information when verifying someone’s identity simultaneously.
Eligibility for the eKYC
To be eligible for eKYC, you must possess a valid Aadhar number as the essential requirement. There is a reason for this since the Aadhar number is the basis for registering customers in India. Aadhar cards can be obtained from the Unique Identification Authority of India.
Documents needed for eKYC
A person who wants to apply through the eKYC process must not submit too many documents since it is entirely online. A passport-size photograph and a copy of your Aadhar card or Aadhar number may be required at the time of application. By authorising an Aaadhar number, the eKYC merchant will receive your information, such as your date of birth, full name, gender, phone number, etc.
Process of eKYC
The reason for Aadhaar-based eKYC is that it is based on the information an individual provides to UIDAI for receiving a unique 12-digit Aadhaar number. If your Aadhaar number is provided before investing in funds, it is very easy for them to access the information contained in your Aadhaar through the eKYC Application Programming Interface. This allows licensed service providers to verify that a customer has purchased service through this system.
- To verify the Aadhar card, the customer must present it to the bank official. As soon as the Aadhaar number is presented to the official, they take note of it.
- Depending on the type of scanner, a potential customer’s fingerprint or retinal image is captured, although fingerprints are the most common choice. There are now also mobile authentication methods available that are based on OTP.
- After the device can read the biometric, it communicates the value to UIDAI via secure servers to identify the user.
- Input biometrics is matched to Aadhaar numbers in the database.
- The potential customer’s identity is likely legitimate if the values match.
UIDAI will release all the customer’s credentials, including photographs, addresses, and date of birth, to the bank or agent after successfully verifying his identity. It allows agents/organizations to store a soft copy of all the details on their remote server, allowing them to access it whenever needed.
Benefits of eKYC
- Aadhaar cardholders can share these KYC data directly with the UIDAI without requiring the government agency to repeatedly request access.
- Some people find it challenging to gather all the documents and logically assemble them. With the help of eKYC, you can now submit your KYC documents online, so a large portion of the hassle can be eliminated. The entire KYC process has become completely paperless and significantly more efficient with this method.
- The UIDAI database provides electronic KYC information, which ensures that the information is tamper-proof since it is based on the records maintained by the government.
- To protect the protection of the Aadhaar holder’s personal information, KUA encrypts the shared data.
- Access to sensitive personal information is subject to additional restrictions, including biometrics.
- In the event of the presence of eKYC, the account holder’s Aadhaar number does not have to be shared with a KYC company when asking for the account holder’s KYC data. In this particular instance, a reference ID is created to ensure data protection and the completion of the process.
- There is no obligation for individuals who own Aadhaar numbers to share their KYC information with the platform, and they can choose not to do so at their discretion.
- Using eKYC, you can also easily submit documents when applying for a loan and check your loan status.
There are a lot of different advantages that come along with using eKYC registration. Since all documentation may be filed electronically, the process that is being followed is rather straightforward. After the procedure has been finished, individuals can open Demat accounts and conduct financial transactions with a simpler and less fraught risk of being defrauded.
Read Also: KYC Process: How Does The KYC Process Works?