In 2004, the RBI mandated that all financial institutions are required to complete the KYC verification process of their customers before dealing with any financial transactions.
- According to the 2021 public edition of the Basel AML Index, the average global money laundering risk score increased to 5.3 out of 10 from 5.22.
This figure is evident enough to understand the importance of completing KYC verification to avoid fraud and money laundering risks.
What is KYC?
As per the RBI’s guideline, financial institutions possess a list of documents that every customer is required to duly fill and submit for every money-related transaction. After verifying these papers, financiers will sanction any loan or complete the transaction. By complying with KYC regulations, terrorism financing, fraud schemes, and money laundering can be kept at bay.
As per KYC laws, financial institutions must maintain higher standards and spend more money to adhere to the regulations. These regulations signify that any organization, business or platform that connects with a financial institution to open an account or involve in any transaction will have to abide by these rules.
Besides knowing what KYC is, one should also know how to complete KYC verification and avoid loan rejection.
Types of KYC verification
There are usually two types of KYC verification, and both are convenient. However, it is up to a customer’s convenience. Individuals are required to submit their KYC documents before availing of any financial product, such as personal loan, business loan, home loan, etc. Moreover, this document is essential for investing in mutual funds, fixed deposits, etc.
-
In-person verification
Just as the name suggests, in-person KYC verification is held offline. In this process, an individual can either visit the nearest Aadhaar-based KYC Kiosk or visit a mutual fund office to verify the credentials with Aadhaar biometrics. Alternatively, one can also call the KYC registration agency to send a verification officer to conduct the process. Some mutual funds also allow in-person KYC verification through video calls where the customer needs to show their original Aadhaar card and address documents.
-
Online KYC verification
Individuals can now opt for e-KYC verification online by providing the necessary details. For this, one needs to upload the scanned copy of their Aadhaar card. However, if one is willing to invest in a mutual fund through online KYC verification, they can only invest up to Rs. 50,000.
Importance of KYC procedure
Especially within the investment industry, KYC is a standard requirement. It ensures that the financial institutions are not involved in unlawful activities, such as money laundering. With both online and offline KYC verification, financial bodies can identify illegal activities of such kind.
Besides, many customers use financial instruments like mutual funds, trading, etc. With KYC authentication, financial institutions have the authority to verify the legal identity of the customer. This verification includes checking the address and confirming the owners’ identities and authorized signatories.
Along with the authentication of these companies, the KYC verification requires the nature of employment stated as well as the business details of a customer. This information will also substantiate the authenticity of the company or individual. Individuals are required to submit the following documents during KYC verification:
- Aadhaar, voter, and PAN card
- Passport and driving license
- Legal rental agreement
- Electricity, gas bill, etc.
KYC Documents
Borrowers must note that KYC documents are one of the important documents required for a personal loan. After submitting the documents, financiers will compare the documents to see whether the information provided by the customer is authentic or not.
The submission of KYC documents will allow borrowers to ensure a hassle-free loan approval. Besides, successful submission of documents will accelerate the verification process of personal loans.
Potential applicants must arrange these documents before applying for a personal loan to avoid delays in loan processing.
Reputed financial institutions like Bajaj Finserv extend pre-approved offers to their existing customers. These offers ease the loan application process significantly and reduce the hassle of documentation. Individuals can find these offers on personal loans, credit cards, business loans, etc., and check their pre-approved offers by submitting their essential credentials.
Thus, the verification of KYC documents will assist borrowers in curbing different illegal activities in the country, and borrowers must adhere to this procedure while seeking financial services.
Apart from offering a smooth verification and quick approval of loans, popular NBFCs like Bajaj Finserv provide various pre-approved offers to customers that help in streamlining the loan application process. These offers are available on several financial products like personal loans, business loans, and more. You can check your pre-approved offers by entering basic contact details.
Read Also: Know How You Can Avail of an Instant Personal Loan for Urgent Expenses
