Nowadays, whenever you open a bank account, get a SIM card or want to avail any financial service, the first thing you hear is KYC. But have you ever wondered what KYC is and why it has become so important?
Understand about it in simple words here.
What does KYC mean?
The full name of KYC is Know Your Customer. Its Hindi meaning is Know Your Customer. This is a process in which a company, bank or any service providing organization ensures that their customer is genuine. There is no fake or fraudulent person.
Which documents are required for KYC?
To do KYC, you have to provide some documents related to your identity and address. This includes Aadhar Card, PAN Card, Passport, Voter ID Card and Driving License. Your identity is confirmed by providing copies of these documents and sometimes through live photo or video verification.
Why is KYC necessary in banks?
KYC is very important in the banking sector because it reduces the chances of money laundering and fraud. The bank confirms that you are the same person who is opening the account. Without KYC, the bank can provide you only limited service. If you do not get KYC done on time, your account may also get frozen.
Why is KYC required while purchasing a mobile SIM?
Mobile operators want to see whether the SIM is in the name of the real person or not. This provides safety from fraud, fake calls and spam. Before SIM activation, Aadhaar-based eKYC has become very normal, in which identity is verified only through OTP.
KYC is also necessary in digital apps and wallets
If you use Paytm, PhonePe, Google Pay or any digital wallet, then you must have noticed that without doing KYC, you can do only limited transactions. KYC is necessary for full access.
In how many ways is KYC done?
Physical KYC is done by taking photo of the document and filling the form. The second method is eKYC. This is done through Aadhaar OTP. In Video KYC, identity is confirmed through live video call.