Articles

Bank and KYC Policy

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This Article is written by Prachi Yadav, a student at Amity University, Noida

INTRODUCTION

The word bank has been derived from the Greek word ‘Banque’ which means a seat or a bench of justice. The quorum are the people who are money lenders in the money dealing business they administer justice in this money saving account business called as stock or fund. The account administration is two-sided activity by both the parties the banker and the customer are append in know your customer policy, is an age-old influential relation. the authorities who take responsibility of the amount saved or incurred by the other person are called as Banker under the norms established by the bench of justice these people work onboard as the dealers, people who deposit their amount are called customers hence there is a dealer and customer relationship under the norms on and from this business. 

The Reserve bank of India is an apex institution which came on from the effect on 1st April 1949 by the Hilton young commission 1926. The other bank such as state bank of India, Exim bank, commercial banks and financial institutions was organized after some uncertain events during the course of its steady evolution. The Reserve bank is the custodian of other banks and the backbone of Indian economy by giving undertaking to banks for their credit ration. The reserve bank as controller of money supply in the economy, issues notice weekly and issues directions in resonance to the banks for the perusal of administration of the Kyc policy in banks.

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WHAT IS KYC AND HOW IS KYC PROCESS MAINTAINED?

In the banking business the banker or the dealer has to open a number of accounts in a day and communicate with the concerned clients and make an alignment of their relation to know the client. They identify the customer by their client identification number. The client must be informative to state its correct information, true to his knowledge and minimum requirements for the kyc process. This identification and verification process where the bank has to verify the Aadhar authentication is called as kyc process. whereas the bank has to maintain a list of entries made in this process is saved in database electronic system in the banker’s cubicle and in the hardcopy, document is maintained in a client information document form. The reserve bank issues directions regarding this mandatory process to verify the nationality of the citizens in India and their accounts registered in the bank hence the credit rationing and money supplier is done by the Reserve bank from time to time as in circumstance.

RBINET

An online transmission system operating on RBINET, BANKNET for a client ongoing a personal computer is called RBINET and he can communicate with the server over a devoted leased line of a dial up line.

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Note: The bank may refuse the kyc process if the customer information and if in case found that the information is faulty or incorrect then bank may refurbish the information by communicating and recording the statements of the concerned client. The know your customer is different process in each and every bank depending on the high level of efficacy and accuracy maintained or just the documentary evidences perpetuated by the bank both on record are taken or the minimal is ascribed for this process and is saved in the data base for future reference.

The information maintained as a soft copy, or an entry made is saved is known as ekyc policy. The private offshore banks or trans-national banks, foreign banks and financial institutions have an onboard streamline process on the ekyc portal and the (UIDAI). the ekyc is only eligible for customers who have abroad business for currency exchange. The ekyc is now a days a boon to the India’s fintech sector as it’s the easiest and safest manner to honor the virtual verification process.                     

WHY IS THE KYC PROCESS IMPORTANT? 

To know your customer and understand them kyc policy is a form of document which is kept by every banker, the banker acts as a caretaker for its customer in case of any discrepancy for the purpose of smooth relations between them. The kyc policy is an accession to other relations established by the bank with its customer such as a debtor and a creditor or lender and borrower etc.

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  • The kyc process encompasses of ID card verification, face verification, document verification such as utility bills as proof of address, and biometric verification.
  • The kyc is a stratagem which calls for all course of action necessary to certify customers risk – assessment, identification number all true information for the working of the standard operating procedure in the database.
  • The kyc policy is a buildup on a software portal for all intra -bank functions and services provided by the bank to its customer and the services rendered y the bank to its customer for maintaining their quality check in terms of books of accounts for safety and accuracy in the information.
  • For the smooth functioning of the fund transfer and messages for payment and to ensure that the payment network is working online. 
  • Then the banks must obey and comply with the kyc regulations for clearing of funds to limit frauds. Kyc responsibility reposes with the bank.
  • The kyc policy takes course of action to ward off   against crimes such as fraud, money laundering, illegal and corrupt activities. 
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KYC POLICY AND CUSTOMER DUE DILIGENCE

Kyc policy is the framework for bank and financial institutions casted for the customer identification process. It has been extracted from the international mandate in order to prevent money laundering and terrorist financing, to toughen Know Your Customer procedures need to be implemented in the first stage of any business relationship when you admit a new customer. Banks generally frame their KYC policies incorporating the following four key elements:

  • Customer Policy
  • Identification Procedures (data collection, identification, verification, politically exposed person/sanctions list check) 
  •  Customer Identification Program (CIP)
  • Risk assessment and management 
  • Ongoing monitoring and record-keeping 

This involves verifying a customer’s identity through documents, including a national ID Document with a document reader and advanced document verification software. 

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