Using financial services in India is now going to be easier than ever. Preparations are being made by the government and financial regulators to implement the Central Know Your Customer 2.0 (CKYC 2.0) system. It will start in banks and insurance companies from August, while later mutual funds and brokerage companies will also join it. After this new system, customers will not have to submit KYC documents again and again every time they buy a new financial product or open an account.
Banks and insurance companies will start operations from August.
According to Reuters report, under CKYC 2.0, customers will have to give their consent only once. After this, banks, insurance companies and other financial institutions will be able to directly access the verified information present in the central registry. This will make the process of opening an account, taking an insurance policy or availing other financial services much faster and easier.
This project is being jointly implemented by the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) and insurance regulator IRDAI. At present, banks and insurance companies are being included in it, while mutual funds and brokerage companies are likely to be included in it by the end of this year.
The hassle of getting KYC done again and again will end.
Currently, a person has to repeatedly submit KYC documents to different institutions to open a bank account, invest in mutual funds, buy insurance or avail other financial services. Although a central KYC registry with about 120 crore records already exists in the country, questions have been raised regarding duplicate records, incomplete information and quality of data. For this reason many institutions do not completely trust that data.
In CKYC 2.0, each record will have a ‘confidence score’, which will indicate how reliable the customer’s information is and whether it has been verified by a financial institution or not. To view any customer’s records, any organization will have to take his/her approval through OTP.
Will help in preventing fraud and increasing investment
Experts believe that this new system will not only increase the convenience of customers, but will also help in curbing financial fraud. Having verified information available in one place will reduce the risk of fake documents and duplicate identities.
DP Singh, Joint CEO of SBI Funds Management, says that the mutual fund industry can get big benefits from CKYC 2.0. According to him, only State Bank of India (SBI) has about 50 crore bank accounts. If even a small number of these eligible customers start investing easily, the investor base of the mutual fund industry can grow rapidly.
Financial inclusion will get new strength
According to World Bank data, about 89% of adults in India have a bank account by 2024, but participation in financial products like mutual funds, insurance and pensions is still relatively low. In such a situation, the government believes that the integrated customer identification system will make it easier for people to access investment and insurance services. Experts say that if CKYC 2.0 is successful, India will also take a big step towards a strong digital identity based financial system like Singapore and many European countries.
