A central KYC registry with uniform norms and inter-usability across all financial sectors has been set up to act as a repository of KYC records. This will help banks, mutual funds, brokerage firms and depository participants offer services without asking customers to provide multiple KYC undertakings. But can this create other hassles and complicate procedures or will it make things easier for everyone? Sanket Dhanorkar spoke to four experts to find out.
Adhil Shetty CEO, Bankbazaar
Yes, but… As a concept, we welcome the CKYC. The C-KYC guidelines call for additional information to be taken from new customers and uploaded to the C-KYC system. This would eliminate the need for a fresh KYC undertaking each time a customer wants to buy mutual funds, which can be frustrating for them. C-KYC will be a one-time activity.
It will centralise and streamline the KYC process. Once you comply with the CKYC norms, a unified customer identification code will be generated, which will be used at each point of transaction where KYC is required. This is obviously an elegant solution to apply to the KYC process.
What the Sebi guidelines don’t talk about—and this is something we’re seeking clarity on—is what happens to KYC through Aadhar and OTP? We do believe that Aadhar was a disrupter in the KYC process. So, does the C-KYC complement the earlier processes, or is it a completely different system? These are some of the matters related to the idea of centralised KYC on which the industry at large has sought clarity from Sebi.
However, none of the guidelines on CKYC say that fresh transactions need to be stalled before the completion of CKYC. Therefore, we are expecting it to be business as usual, while any new norms can be fulfilled over a period of time. Bringing in a new system will always have its own challenges in terms of legality and implementation. But we are in favour of adopting a streamlined KYC process, once the guidelines have been interpreted correctly.
Jimmy Patel CEO, Quantum AMC
Yes. Central KYC is a game changer for the finance industry. KYC duplication will be avoidable to a great extent with the introduction of C-KYC. The validation of supporting documents will be carried out by the respective issuing authority. This would mean more well authenticated data and less scope of forgery. The cost of KYC processes would be reduced substantially. C-KYC would be applicable across various financial sectors, which would help in better penetration, as investors with bank accounts will be able to invest in mutual funds or in any other industry without having to fulfill any further KYC requirement.
This has come as a boon for a happy investment journey. The government will authorise the Central Registry of Securitization Asset Reconstruction and Security Interest of India (CERSAI) to act and to perform the functions of the Central KYC Records Registry (CKYCR), including receiving, storing, safeguarding and retrieving the KYC records in the digital form of a ‘client’.
Once implemented, the KYC records received and stored by the CKYC system would be very handy. When a client registers with the requisite KYC documents specified by the Prevention of Money Laundering Act like Aadhaar card, passport, driving license, voter ID, etc. an identifier will be issued, which can be quoted whenever any new account is opened.
The concept of a C-KYC repository, which is a mammoth project in itself, has been well appreciated by the customers.
Dinesh Thakkar Chairman & MD, Angel Broking
Maybe…C-KYC will replace the existing multiple KYC submission processes while opening savings bank accounts, buying life insurance or investing in mutual fund products into a one-time centralised process. At present, customers have to provide KYC documents separately to every financial institution.
This change will ease the investment process, help speed up financial inclusion and spread the culture of saving and investment. Once it is implemented, C-KYC compliance will become an addition to the existing process of KRA which is a similar exercise. However, the Association of Brokers is now seeking clarity from Sebi and the exchanges, as well as from the depositories about the various operational aspects of the C-KYC notification.
On reading the operating guidelines, the C-KYC process of updating and uploading the requisite documents is more user friendly than the existing KRA process. While it is too early to comment on whether C-KYC will facilitate a faster and smoother client registration process, the real challenge is related to whether the banks and other financial institutions are going to update their records in the C-KYC repository diligently when there is a change in the details of a client.
If they fail to do so, all other intermediaries that open accounts for the client based on the C-KYC records will face difficulties in processing the client’s records. This, in turn, will pose a threat to the interests of all stakeholders.
Manoj Nagpal CEO, Outlook Asia Capital
No.Central KYC Registry is a good first step to reduce the duplication of KYC across the financial sector. But, at best, it is still just a first step and does fall short in many aspects. First, this means that your existing KYC is not enough, and will not be automatically ported to the C-KYC. If you want to be part of the C-KYC repository, you will have to register a fresh KYC with an entity registered with Central KYC system. Second, the core objective of the Central KYC, which is inter-operability across participants, may not really be possible at all, since the C-KYC has not designated the PAN as a mandatory identifier, but Sebi has mandated it even for C-KYC. Thus, if you complete your C-KYC process without a PAN, it will not be valid with capital market participants like mutual funds or your depository participant. Hence, it is advisable that you use your PAN in the new C-KYC process, if you really want it to be a one-time process and use it across all financial entities. Third, the Central KYC has been structured with the needs of banks in mind. There are three types of KYC—the full KYC, the simplified measures KYC and the small accounts KYC. Although these can be used across all banks, they may not be valid with other participants. Thus the most pertinent reason for the expansion, which is all bank account holders being able to access all the financial products, is still some time away.
