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I was taking a session on marketing in an institute in Chennai on Sunday.  
When a discussion came about Introduction  I told that Introduction is to be obtained from the 
existing customer of the Bank.  A candidate told that he recently opened account in a 
Nationalised Bank and introductions was not insisted since he gave the required documents. 
I verified today with a Bank Manager and he also confirmed that nowadays introduction
of an existing customer is not insisted.
I thought it is worth to give the KYC norms for information of candidates.

please read.

1. What is KYC?
KYC is an acronym for “Know your Customer”, a term used for customer identification process. It involves making reasonable efforts to determine true identity and beneficial ownership of accounts, source of funds, the nature of customer’s business, reasonableness of operations in the account in relation to the customer’s business, etc which in turn helps the banks to manage their risks prudently. The objective of the KYC guidelines is to prevent banks being used, intentionally or unintentionally by criminal elements for money laundering.
KYC has two components - Identity and Address. While identity remains the same, the address may change and hence the banks are required to periodically update their records.
2. Is there any legal backing for verifying identity of clients?
Yes. Reserve Bank of India has issued guidelines to banks under Section 35A of the Banking Regulation Act, 1949 and Rule 7 of Prevention of Money-Laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005. Any contravention thereof or non-compliance shall attract penalties under Banking Regulation Act.
3. I want to keep a fixed deposit in a bank. Is KYC - applicable to me?
Yes. KYC is applicable to customers of the bank. For the purpose of KYC following are the ‘Customers of the bank.
  • a person or entity that maintains an account and/or has a business relationship with the bank;
  • one on whose behalf the account is maintained (i.e. the beneficial owner);
  • beneficiaries of transactions conducted by professional intermediaries, such as Stock Brokers, Chartered Accountants, Solicitors etc. as permitted under the law, and
  • any person or entity connected with a financial transaction which can pose significant reputational or other risks to the bank, say, a wire transfer or issue of a high value demand draft as a single transaction.
4. Is there any procedure specified for Customer Identification?
Customer identification means identifying the customer and verifying his/her identity by using reliable, independent source documents, data or information. Banks have been advised to lay down Customer Identification Procedure to be carried out at different stages i.e. while establishing a banking relationship; carrying out a financial transaction or when the bank has a doubt about the authenticity/veracity or the adequacy of the previously obtained customer identification data.
5. Once KYC requirements are complied with while opening the account, whether the bank can again ask for KYC compliance from me?
Yes. To ensure that the latest details about the customer are available, banks have been advised to periodically update the customer identification data based upon the risk category of the customers.
Banks create a customer profile based on details about the customer like social/financial status, nature of business activity, information about his clients’ business and their location, the purpose and reason for opening the account, the expected origin of the funds to be used within the relationship and details of occupation/employment, sources of wealth or income, expected monthly remittance, expected monthly withdrawals etc. When the transactions in the account are observed not consistent with the profile, bank may ask for any additional details / documents as required. This is just to confirm that the account is not being used for any Money Laundering/Terrorist/Criminal activities.
6. I had submitted my driving licence as a proof of identity and address but still the bank asked for telephone / electricity bill.
There are two aspects of Customer Identification. One is establishing identity and the other is establishing present residential address.
For establishing identity, the bank requires any authentic document carrying photo of the customer such as driving licence/ passport/ pan card/ voters' card etc. Though these documents carry the residential address of the customer, it may not be the present address. Therefore, in order to establish the present address of the customer, in addition to passport/ driving licence / voters' card / pan card, the bank may ask for utility bills such as Telephone / Electricity bill etc.
The detailed list of the documents that the bank can ask is given below.
Accounts of Individuals
Legal name and any other names used
(i) Passport
(ii) PAN card
(iii) Voter's Identity Card
(iv) Driving licence
(v) Identity card (subject to the bank's satisfaction)
(vi) Letter from a recognized public authority or public servant verifying the identity and residence of the customer to the satisfaction of bank
Correct permanent address
(i) Telephone bill
(ii) Bank account statement
(iii) Letter from any recognized public authority
(iv) Electricity bill
(v) Ration card
(vi) Letter from employer (subject to satisfaction of the bank)
(any one document which provides customer information to the satisfaction of the bank will suffice)
Accounts of Companies
Name of the company
(i) Certificate of incorporation and Memorandum & Articles of Association
(ii) Resolution of the Board of Directors to open an account and identification of those who have authority to operate the account
(iii) Power of Attorney granted to its managers, officers or employees to transact business on its behalf
(iv) Copy of PAN allotment letter
(v) Copy of the telephone bill
Principal place of business
Mailing address of the company
Telephone / Fax Number
Accounts of Partnership Firms
Legal name
(i) Registration certificate, if registered
(ii) Partnership deed
(iii) Power of Attorney granted to a partner or an employee of the firm to transact business on its behalf
(iv) Any officially valid document identifying the partners and the persons holding the Power of Attorney and their addresses
(v) Telephone bill in the name of firm / partners
Names of all partners and their addresses
Telephone numbers of the firm and partners
Accounts of Trusts & Foundations
Names of trustees, settlers, beneficiaries and signatories
(i) Certificate of registration, if registered
(ii) Power of Attorney granted to transact business on its behalf
(iii) Any officially valid document to identify the trustees, settlors, beneficiaries and those holding Power of Attorney, founders / managers / directors and their addresses
(iv) Resolution of the managing body of the foundation / association
(v) Telephone bill
Names and addresses of the
founder, the managers / directors and the beneficiaries
Telephone / fax numbers
Accounts of Proprietorship Concerns
Proof of the name, address and activity of the concern
*  Registration certificate (in the case of a registered concern)
*  Certificate / licence issued by the Municipal authorities under Shop & Establishment Act,
*  Sales and income tax returns
*  CST / VAT certificate
*  Certificate / registration document issued by Sales Tax / Service Tax / Professional Tax authorities
* Registration / licensing document issued in the name of the proprietary concern by the Central Government or State Government Authority / Department.
* IEC (Importer Exporter Code) issued to the proprietary concern by the office of DGFT as an identity document for opening of bank account.
*  Licence issued by the Registering authority like Certificate of Practice issued by Institute of Chartered Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries of India, Indian Medical Council, Food and Drug Control Authorities, etc.
Any two of the above documents would suffice. These documents should be in the name of the proprietary concern.
7. Can my wife who is not having any address proof in her name, open an account with the bank?
Yes. In such cases where the utility bills required for address verification are not in the name of the person who wants to open an account ( close relatives, e.g. wife, son, daughter and daughter and parents etc. who live with their husband, father/mother and son, as the case may be) , an identity document and a utility bill of the relative with whom the prospective customer is living along with a declaration from the relative that the said person (prospective customer) wanting to open an account is a relative and is staying with him/her is acceptable. As supplementary evidence bank may ask for a letter received through post for further confirmation.
8. I am a daily wage earner without any document to satisfy the bank about identity and address. Can I open a bank account?
A customer belonging to low income group who is not able to produce  documents to satisfy the bank about his identity and address, can open bank account with an introduction from another account holder who has been subjected to full KYC procedure provided that the balance in all his accounts taken together is not expected to exceed Rupees Fifty Thousand (Rs. 50,000/-) and the total credit in all the accounts taken together is not expected to exceed Rupees One Lakh (Rs. 1,00,000/-) in a year. The introducer’s account with the bank should be at least six months old and should show satisfactory transactions. Photograph of the customer who proposes to open the account and also his address needs to be certified by the introducer,
any other evidence as to the identity and address of the customer to the satisfaction of the bank.
If at any point of time, the balance in all his/her accounts with the bank (taken together) exceeds Rupees Fifty Thousand (Rs. 50,000/-) or total credit in the account exceeds Rupees One Lakh (Rs. 1,00,000/-) in a year, no further transactions will be permitted until the full KYC procedure is completed.
In order not to inconvenience the customer, the bank will notify the customer when the balance reaches Rupees Forty Thousand (Rs. 40,000/-) or the total credit in a year reaches Rupees Eighty thousand (Rs. 80,000/-) that appropriate documents for conducting the KYC must be submitted otherwise operations in the account will be stopped.
9. Whether a certificate from my employer is sufficient as identity as well as address proof for opening an account?
Banks rely on such certification only from corporate and other entities of repute provided that they are aware of the competent authority designated by the concerned employer to issue such certificate. In addition, banks also require at least one of the valid documents indicated above viz. Passport, Driving Licence, PAN Card, Voter's Identity Card etc. or utility bills for KYC purposes for opening bank account of salaried employees of corporate and other entities.
10. Whether the information given by me to the bank under KYC is treated as confidential?
Yes. The information collected from the customer for the purpose of opening of account is treated as confidential and details thereof are not divulged for cross selling or any other similar purposes.
11. Whether KYC is applicable for Credit Cards/Debit Cards/Smart Cards?
Yes. Application of full KYC procedure is necessary before issuing Credit Cards/Debit Cards/Smart Cards and also in respect of add-on/ supplementary cards.
12. If I refuse to give information on KYC asked for by the bank, what action the bank can take against me?
Where the bank is unable to apply appropriate KYC measures due to non-furnishing of information and /or non-cooperation by the customer, the bank can consider closing the account or terminating the banking/business relationship after issuing due notice to the customer explaining the reasons for taking such a decision.

Key changes in the KYC norms, effective January 01, 2012

  • In-Person Verification (IPV) – Information provided in the KYC form has to be verified in person by the AMC, its Registrar and Transfer Agent (RTA) or distributors who are AMFI / NISM certified and compliant with Know Your Distributor (KYD) guidelines.
  • KYC Application Forms – Some changes have been made in the KYC application form and are listed below for ready reference. 

    Individual investors:
    • Marital status to be provided.
    • Proof to be submitted for PAN exempt investors has been listed.
    • Income details – the slabs have been modified and an option of providing net worth as on a recent date in lieu of gross annual income has been provided.
    • Proof of Address and Identity – there are some changes in the list of acceptable documents.
    Non-individual investors:
    • Place of incorporation, date of commencement of business have been added.
    • Income details – the slabs have been modified, and additional information on the net worth as on a recent date has been sought. Proof to be submitted for PAN exempt investors has been listed.
    • Following details of Promoters / Partners / Karta / Trustees / Whole time directors are required: Name, PAN with proof, DIN (for directors) / UID, if any (for others), address proof and photographs.
    • Photograph of any one of the authorised signatories on the KYC application form.
    • Copy of the balance sheets for the last 2 financial years and thereafter to be submitted every year.
    • Copy of latest share holding pattern.
  • Exemptions/Clarifications to PAN
    For the following set of customers/transactions, while PAN is not mandatory, KYC requirements are necessary.
    • Investors residing in the state of Sikkim.
    •  Lump sum investment (fresh purchase & additional purchase) and SIP installments by an investor in rolling 12 months period or financial year i.e. April to March does not exceed Rs. 50,000/-.
    • Transactions undertaken on behalf of Central Government and/or State Government and by officials appointed by Courts e.g. Official liquidator, Court receiver etc.
    Such customers also need to get their KYC done by filling up the KYC forms and all necessary details, in lieu of PAN. The application form from such customer should be accompanied with duly filled KYC form or an acknowledgement of KYC.
  • Impact on Investors
    • Existing and new investors who have successfully completed the KYC process with CVL-KRA for investments in mutual funds (in the old format) - No action is required and they can continue to use the KYC acknowledgment issued to them for mutual fund investments. However it will not be applicable for investments with other intermediaries in the securities market.
    • Investors who have NOT completed the KYC process for investments in mutual funds (in the old format) – New uniform KYC norm as explained above is applicable and the KYC acknowledgment issued by the KRAs like CVL or CISPL can be used for all investments in securities market, including mutual funds.
    • Investors who have completed KYC process through any of the intermediaries such as DP, PMS, etc., on or after 1st January, 2012 and hold a valid acknowledgement issued by KRA for the same may invest with any of the mutual funds with the same acknowledgement. However, a mutual fund may choose to carry out enhanced due diligence based on its internal client due diligence policy.
    • New KYC form can be submitted by an investor along with an investment application (purchase / additional purchase / switch / SIP mandate forms) and not on a stand-alone basis, as was possible till 31/12/2011. However, an investor who has investments in any mutual fund and is not KYC compliant may submit new uniform KYC form to the mutual fund by quoting the folio number.
    • As per clause 1.iv of the SEBI circular dated December 23, 2011 the intermediary shall carry out KYC when the client chooses to trade / invest / deal through the intermediary. Therefore, it is essential for an intermediary to have the client account opening form duly signed by the investor along with the KYC documents in order to proceed with carrying out the KYC, uploading the KYC information on the system of the KRA, and forwarding KYC documents to the KRA. This may not necessarily be accompanied by a payment instrument for investments which can happen subsequent to account opening.
    • Mutual fund distribution platforms using electronic mode of transaction submission should get the KYC of first-time investors initiated through any of the mutual funds by filling up mutual fund’s account / folio opening form. Once the investor’s KYC gets triggered with a KRA, the investor is free to transact with any mutual fund.
  • In-Person Verification (IPV) and Document Verification/Attestation:
    1. 1. IPV and Document Verification shall be conducted only by the following:

      1. Employees of AMC
      2. RTA appointed by the AMC
      3. KYD Compliant Distributors, with valid ARN
      4. Authorized official of a scheduled commercial bank, only in case of Direct applications
    2. The following needs be recorded on the KYC form:

      1. Name of the person doing attestation of documents/IPV, his designation, organization, his signatures and date of IPV
      2. ARN code and name of the distributor in case of attestation/IPV done by a valid ARN holder
    3. Where IPV/Document verification is done by a sub-broker:

      1. The sub broker ARN code should be KYD compliant, with valid ARN
      2. The sub broker should additionally affix the following three details on the KYC application form
      3. Sub-broker’s ARN code,
      4. ARN code of the main distributor
      5. Sub broker code allotted to the sub-broker by the main distributor
    4. Attested copies of the KYC documents can be accepted, if the same are attested by the list of people authorised to attest the documents, as mentioned on the KYC forms.
    5. Special note for distributors:

      1. In case of attestation/IPV done by a sub broker, the main distributor under whose code the folio is opened shall also be responsible for the KYC process, including the IPV, conducted by the sub broker
      2. Distributors undertaking verification of documents and the IPV shall exercise due care and diligence while validating the documents and verifying the identity of the client in-person
      3. Various due diligences to be exercised by the distributors (including sub-brokers who are registered with AMFI) while conducting the KYC process will form part of Code of Conduct prescribed for distributors
KNOW YOUR CUSTOMER -- A FEW POINTS Reviewed by sambasivan srinivasan on 10:03:00 AM Rating: 5

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