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Saturday, December 03, 2016

Know Your Customer Guidelines FAQs- FREQUENTLY ASKED QUESTIONS

Know Your Customer Guidelines 
FAQs-  
FREQUENTLY ASKED QUESTIONS
Updated up to September 02, 2016)
QUESTION 1. What is KYC? Why is it required?

Response: KYC means “Know Your Customer”. It is a process by 
 which banks
obtain information about the identity and address of the customers. 
This process helps to ensure that banks’ services are not misused. 
The KYC procedure is to be completed by the banks while opening accounts. 

Banks are also required to periodically update their customers’ KYC details


QUESTION 2. What are the KYC requirements for 
opening a bank account?

Response: To open a bank account, one needs to submit a 
 ‘proof of identity and proof of address’ together with a recent photograph.



QUESTION 3. What are the documents to be given as 
‘proof of identity’ and ‘proof of address’?

Response: The Government of India has notified six documents as
 ‘Officially Valid Documents’ (OVDs) for the purpose of producing 
proof of identity. 

These six documents are Passport, Driving Licence, 
Voters’ Identity Card, PAN Card, Aadhaar Card issued 
by UIDAI and NREGA Job Card. You need to submit any one of
 these documents as proof of identity. If these documents also 
contain your address details, then it would also be accepted as ‘
proof of address’. 
If the document submitted by you for proof of identity does
 not contain address details, then you will have to submit
 another officially valid document which contains address details.

QUESTION 4. If I do not have any of the documents 
listed above to show my ‘proof of identity’,
 can I still open a bank account?
Response: Yes. You can still open a bank account known as 
 ‘Small Account’ by submitting your recent photograph and
 putting your signature or thumb impression in the presence of the bank official.


QUESTION 5. Is there any difference between 
such ‘small accounts’ and other accounts

Response: Yes. The ‘Small Accounts’ have certain limitations such as:
·         balance in such accounts at any point of time should not exceed Rs.50,000
·         total credits in one year should not exceed Rs.1,00,000
·         total withdrawal and transfers in a month should not exceed Rs.10,000
·         Foreign remittances cannot be credited to such accounts.

Such accounts remain operational initially for a period of
 twelve months and thereafter, for a further period of
 twelve months if the holder of such an account provides
 evidence to the bank of having applied for any
 of the officially valid documents within twelve months
 of the opening of such account.

QUESTION 6. Would it be possible, 
if I do not have any of the officially valid documents,
 to have a bank account, which is not subjected to
 any limitations as in the case of ‘small accounts’?
Response: A normal account can be opened by submitting a
 copy of any one of the following documents as Proof of Identity (PoI):

(i) Identity card with person’s photograph issued by Central/
State Government Departments, Statutory/Regulatory Authorities,
 Public Sector 
Undertakings, Scheduled Commercial Banks, and Public
 Financial Institutions;
or
(ii) letter issued by a gazetted officer, with a duly attested 
photograph of the person.
For Proof of Address (PoA), you may submit the following 
documents:
i.            Utility bill, which is not more than two months old, 
of any service provider (electricity, telephone, post-paid 
mobile phone, piped gas, water bill);
ii.            Property or Municipal Tax receipt;
iii.            Bank account or Post Office savings bank account 
statement;
iv.            Pension or family Pension Payment Orders (PPOs) 
issued to retired employees by Government Departments or 
Public Sector Undertakings, if they contain the address;
v.            Letter of allotment of accommodation from employer issued
 by State or Central Government departments, statutory 
or regulatory bodies, public sector undertakings, 
scheduled commercial banks, financial institutions 
and listed companies. Similarly, leave and license
 agreements with such employers allotting official 
accommodation; and
vi.            Documents issued by Government departments 
of foreign jurisdictions or letter issued by Foreign 
Embassy or Mission in India.
This, however, is not a general rule and it is left to the
 judgement of the banks to decide whether this simplified 
procedure can be adopted in respect of any customer.

QUESTION 7. If my name has been changed
 and I do not have any OVD in the new name,
 how can I open an account?
Response: A copy of the marriage certificate issued 
by the State Government or Gazette notification 
indicating change in name together with a certified
 copy of the ‘Officially Valid Documents’ in the prior
 name of the person is to be furnished for opening of 
account in cases of persons who change their names on 
account of marriage or otherwise.
QUESTION 8. Are banks required to categorise 
their customers based on risk assessment?
Response: Yes, banks are required to classify their
 customers into ‘low’, ‘medium’ and ‘high’ risk 
categories depending on their AML risk assessment.

QUESTION 9. Do banks inform customers 
about this risk categorisation?

Response: No

QUESTION 10. If I refuse to provide requested
 documents for KYC to my bank for opening
 an account, what may be the result?
Response: If you do not provide the required documents 
for KYC, the bank will not be able to open your account.

QUESTION 11. Can I open a bank account with 
only an Aadhaar card?
Response: Yes, Aadhaar card is accepted as a proof of 
both identity and address.

QUESTION 12. Is it compulsory to furnish 
Aadhaar Card for opening an account?
Response: No. you may furnish Aadhaar card or 
any of the other five OVDs for opening an account.

QUESTION 13. What is e-KYC? How does e-KYC work?

Response: e-KYC refers to electronic KYC.

e-KYC is possible only for those who have Aadhaar numbers. 
While using e-KYC service, you have to authorise the 
Unique Identification Authority of India (UIDAI), 
by explicit consent, to release your identity / address
 through biometric authentication to the bank branches
/business correspondent (BC). The UIDAI then 
transfers your data comprising your name, age, gender,
 and photograph electronically to the bank. 
Information thus provided through e-KYC process is 
permitted to be treated as an ‘Officially Valid Document’
 under PML Rules and is a valid process for KYC verification.

QUESTION 14. Is introduction necessary 
while opening a bank account?
Response: No, introduction is not required.

QUESTION 15. If I am staying in Chennai but if 
my proof of address shows my address of 
New Delhi, can I still open an account in Chennai?
Response: Yes. You can open a bank account in 
Chennai even if the address in the “Officially Valid 
Document” is that of New Delhi and you do not have 
a proof of address for your Chennai address. 
In such case, you can submit the officially valid 
document having your New Delhi address, 
 together with a declaration about your 
Chennai address for communication purposes.

QUESTION 16. Can I transfer my existing 
bank account from one place to another? 
Do I need to undergo full KYC again?
Response: It is possible to transfer an account 
from one branch to another branch of the same bank.
 There is no need to undergo KYC exercise again for
 such transfer. However, if there is a change of address, 
 then you will have to submit a declaration about the 
current address. If the address appearing in the 
‘Officially Valid Documents’ (OVDs) submitted 
 for proof of address is no longer your valid address 
(i.e. neither your permanent address nor
 your current address), you need to get an Officially 
Valid Document for Proof of Address containing
 the current or the permanent address and furnish
 the same within six months. In case of opening
 an account in another bank, however, you will have to undergo KYC exercise afresh.

QUESTION 17. Do I have to furnish KYC
 documents for each account I open in a
 bank even though I have furnished the 
documents of proof of identity and address?
Response: No, if you have opened a KYC 
compliant account with a bank, other than a 
‘small account’, then for opening another
 account with the same bank, furnishing of documents is not necessary.

QUESTION 18. For which banking transactions
 do I need to Question uote my PAN number?
Response: PAN number needs to be quoted for
 transactions such as account opening, transactions 
above Rs.50,000 (whether in cash or non-cash), etc. 
A full list of transactions where PAN number needs 
to be quoted can be accessed from website of Income 
Tax Department at the following URL: 
QUESTION 19. Whether KYC is applicable for 
Credit/Debit cards?
Response: Yes. KYC exercise is necessary for Credit/ 
Smart Cards and also in respect of add-on/ supplementary 
cards. Since debit cards are issued only to account holders 
and accounts are opened only after the KYC procedure is 
completed, there is no need for separate KYC
 for issuing debit card.

QUESTION 20. I do not have a bank account. 
But I need to make a remittance. 
Is KYC applicable to me?
Response: Yes. KYC exercise needs to be done 
for all those who want to make domestic remittances 
of Rs. 50,000 and above and all foreign remittances.

QUESTION 21. Can I purchase a Demand Draft/
Payment Order/Travellers Cheque against cash?

Response: Yes, Demand Draft/Payment Order/Travellers
 Cheques for below Rs.50,000/- can be purchased against
 cash and such instruments for Rs. 50000/- and above can 
be issued only by way of debiting the customer's account 
or against cheques.

QUESTION 22. Do I need to submit KYC 
documents to the bank while purchasing
 third party products (like insurance or 
mutual fund products) from banks?
Response: Yes, all customers who do not have 
accounts with the bank (known as walk-in customers)
 have to produce proof of identity and address 
while purchasing third party products from banks
 if the transaction is for Rs.50,000 and above. 
KYC exercise will not be necessary for bank’s 
 own customers for purchasing third party products. 
However, instructions to make payment by debit to 
customers’ accounts or against cheques for remittance 
of funds/issue of travellers’ cheques, sale of gold/silver/
platinum and the requirement of quoting PAN number 
for transactions of Rs.50,000 and above will be 
applicable to purchase of third party products from
 bank by its customers as also to walk-in customers.

QUESTION 23. My KYC was completed 
when I opened the account. Why does my 
bank insist on doing KYC again?
Response: Banks are required to periodically 
update KYC records. This is a part of their ongoing
 due diligence on bank accounts. The periodicity of 
such updation varies from account to account depending
 on its risk categorisation by the bank. Periodic updation 
of records also helps prevent frauds in customer accounts.

QUESTION 24. What are the rules 
 regarding periodic updation of KYC?
Response: Different periodicities have been 
prescribed for updation of KYC records depending on 
the risk perception of the bank. KYC is required to be done 
at least once in two years for high risk customers, 
 once in eight years for medium risk customers and 
once in ten years for low risk customers. 
This exercise would involve all formalities for KYC 
 normally taken at the time of opening the account.

While periodic updation of KYC has to be carried out in 
respect of customer categorised as ‘low risk’ also, 
if there is no change in status with respect to the
 identity (change in name, etc.) and/or address of
 such customers the banks may ask such customers 
to submit only a self-certification about 
‘no-change in status’ at the time of periodic updation. 
Banks may not ask such customers to submit copies of
 ‘Officially Valid Documents’ for periodic updation.
In case of change of address of such ‘low risk’ 
customers, they could merely forward a certified copy
 of the document (proof of address) by mail/post, etc. 
Physical presence of such low risk customer is not 
required at the time of periodic updation.
Customers who are minors have to submit fresh
 photograph on becoming major.

QUESTION 25. What if I do not provide the 
KYC documents at the time of periodic updation?
Response: If you do not provide your KYC 
documents at the time of periodic updation, 
bank has the option to close your account. 
 Before closing the account, the bank may, 
however, impose ‘partial freezing’ (i.e. initially 
allowing all credits and disallowing all debits 
 while giving an option to you to close the account 
and take your money back). Later, even credits 
also would not be allowed. The ‘partial freezing’ 
however, would be exercised by the bank after giving you due notice.

QUESTION 26. How is partial freezing imposed?

Response: Partial freezing is imposed in 
the following ways:
·         Banks have to give due notice of 
three months initially to the customers 
before exercising the option of ‘partial freezing’.

·         After that a reminder for further period 
of three months will be issued.

·         Thereafter, banks shall impose ‘partial freezing’
 by allowing all credits and disallowing all debits 
with the freedom to close the accounts.

·         If the accounts are still KYC non-compliant after
 six months of imposing initial ‘partial freezing’ banks 
shall disallow all debits and credits from/to the accounts, 
classifying them inoperative.
Meanwhile, the account holders can revive accounts
 by submitting the KYC documents.

Know Your Customer Guidelines FAQs- FREQUENTLY ASKED QUESTIONS Reviewed by S. Chitra on December 03, 2016 Rating: 5 Know Your Customer Guidelines  FAQs-   FREQUENTLY ASKED QUESTIONS Updated up to September 02, 2016) QUESTION 1. What is KYC? Why is...

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