Investors get relief with standardized digital KYC process

Know Your Customer (KYC) process generally contain heaps of paper work regarding customer identity and customer acceptance policy. All this makes the KYC process very lengthy and tedious. However, e-KYC is the option available to users but, for e-KYC stock brokers and various online mutual fund platforms didn’t have any standardized or unique set of procedures. E.g. In Person Verification (IPV) is completed by allowing customers by sending their recorded video to the concerned broker while some send their representative to the client’s home for the completion of In Person Verification (IPV).

New standard and unique procedure for Digital KYC:

Due to the unusual wake of Covid-19, the Indian government and Securities Exchange Board of India (SEBI) came up with standard and unique procedure for Know Your Customer (KYC). Media reports noted that Securities Exchange Board of India (SEBI) fetched responses from various brokers about how the KYC process is executed presently and then they released new standardized norms of how digital KYC should be executed.

Details regarding Aadhar based KYC:

A notification was published by Finance ministry of India on 22nd April 2020, regarding KYC process to be completely digitized for transactions through some institutions. Notification states that 9 institution’s viz. Link Intime India Pvt Ltd, CDSL Ventures Ltd, Bombay Stock Exchange (BSE), CAMS Investor Services Pvt Ltd, Central Depository Services (India) Ltd, and National Stock Exchange (NSE) can now undertake Aadhar based e-KYC. Notification noted that all the 9 institutions follow all the standards of privacy and security under the Aadhaar Act 2016.

Details regarding Online KYC:

Securities Exchange Board of India (SEBI), clarified the KYC process and its functioning. SEBI notified various online services that Mediators can practice for completion of KYC process.

Some of online KYC are followed:

Aadhaar eSign

Aadhaar eSign is the method recommended by government, in which we can digitally sign a document using Aadhaar. It will be equivalent to the normal sign we do, i.e. physical sign using pen. This will be completed using One-Time Password (OTP).

Digilocker

Digilocker is an initiative of Central government. It allows an individual to store their personal documents online using cloud storage provided by Digilocker. It provides free upload of documents up to 1 GB. Users can store their PAN card, Driving Licence and other important documents. Digilocker is fully secured, while creating an account. The 12 digit Aadhaar number is compulsory and further every time you login to Digilocker, a 4 digit One-Time Password (OTP) will be sent on the linked mobile number with Aadhaar. Digilocker allows you to sign digitally through their platform. Securities Exchange Board of India (SEBI), allowed verification of documents for KYC process using Digilocker. Documents uploaded on Digilocker can be treated as original documents.

In Person Verification (IPV)

In Person Verification (IPV) can be done effortlessly by using mediator’s portal or application. For IPV, a representative from the mediators can connect client through video call and ask some relevant questions. Investor can complete their In Person Verification (IPV) by presenting their original documents on video call.

The complete procedure of KYC:

The complete KYC procedure will be executed online as per SEBI norms by using broker’s application and online portals. They can cross verify clients by name and all the personal details uploaded by them on Digilocker with digital sign. IPV using video call will ensure all the proofs provided by client are genuine. Aadhaar authentication will be done by the Unique Identification Authority of India (UIDAI) whereas PAN authentication will be done by the database available in Income tax department.

Provision made to check the authentication of bank account is very simple. ₹1 will be deposited in a client’s bank account to verify all the details. This is termed as “Penny Drop” mechanism. Once all the verification is done, clients can download all the documents, do E-Sign on each document and upload it back to the portal. Another way customer can follow is to print all the documents, sign them, and upload the scan copy of it in the portal. Due to all this new measures started by government, investing online is an easy-going task.

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