As per RBI guidelines, it is mandatory for the banks to ensure KYC norms for all the customers duly collecting full information of the account holder, type of transactions to be conducted, sources of funds and other relevant matters at the entry level itself. The policy guidelines are to be adhered not only to new accounts but also to the existing accounts. The guidelines are applicable to all types of deposit and advance accounts as well as new technology products such as Credit, Debit, Smart, Add-on cards. The objective of KYC is to insulate banking from unscrupulous participants and to avert misuse/undue advantage of system. The key elements of the policy are:
i) Customer Acceptance Policy (CAP): Bank should obtain prescribed application from the applicant along with the documents/information that is required as per constitution, risk perception, banking practices, legal requirements and RBI guidelines. Banks should not open accounts in the name of Anonymous or fictitious/benami names and Terrorist organizations notified under POTA.
ii) Customer Identification Procedure (CIP): It means collecting information relating to identity, activity, location of the person desiring to open an account in single name or in joint names and verifying the information collected using reliable, independent source documents, data or information. As per latest guidelines, banks are advised to accept Officially Valid Document (OVD) only while opening bank accounts in the name of individuals. Any of the documents such as Passport, Driving license, Permanent Account Number (PAN), Voter’s ID card issued by Election Commission of India, Job card issued by NREGA and Aadhaar Card are treated as OVD. A provision has been added to the definition of OVD which states that where “simplified measures” are applied for verifying the identity of the customers by any of the documents like Photo Identity Card issued by Central / State / Quasi Govt. Departs and Public Sector undertakings including Scheduled Commercial Banks. For verifying the limited purpose of proof of address any of the following documents are deemed to be OVDs.