Top Reasons Why You Need Kyc Documentation - Loan Trivia


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Tuesday 30 August 2022

Top Reasons Why You Need Kyc Documentation

The RBI originally introduced KYC standards in India in 2002, and it became an obligatory practice for all banking institutions in 2004.

Know Your Customer is a procedure of identifying a customer to detect and prevent fraud in financial transactions. KYC is required since it is a legally binding process that all financial institutions must follow.

Some institutions use eKYC verification online. Simply submit a copy of your authentic Aadhaar card to the institution's website to verify yourself. This is the electronic equivalent of knowing a customer. 

What is KYC, and why is KYC Documentation essential?

The following are some key factors to remember about KYC and its requirements:

  1. The purpose of KYC is to ensure that you are who you say you are. Relationship between a person and a bank (here, merely a business relationship) and determining who is the beneficial owner?
  2. Customer Identification Procedure: In any situation, the bank handles the customer identification procedure, i.e., while establishing a relationship between the customer and the bank; while carrying out a transaction (here transactions exclusively refer to financial transactions); or when the bank has doubts about the customer's authenticity or previously collected data.
  3. The bank does not share the information submitted by the consumer with anyone and is kept private.
  4. The two KYC elements are critical for the identification procedure. It must be accomplished in two ways. The customer must submit the necessary paperwork to do so. The buyer must also produce documents proving his or her current and permanent addresses.
  5. If a person is not having an identity, he or she is entitled to open a joint account based on a relationship with an existing customer.

The fundamental reason for KYC's importance is that it actively tries to prevent banks from accumulating black money along with other forms of money laundering, either mistakenly or intentionally.

KYC documentation is essential since it is a legally binding process that all financial organizations must follow. Some institutions use online e-KYC verification, while others require a face-to-face meeting with the customer.

Read Also: All You Need To Know About KYC And E-KYC Verification Online

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