KYC means “Know Your Customer”.
The Reserve Bank of India has Amended rules for non-banking financial companies (NBFCs) with regard to their Know-Your-Customer (KYC) exercise.
It has relaxed the time limit during which such due diligence is required.
- Why? The rules have been eased due to practical difficulties and constraints in getting KYC documents at frequent intervals.
- Full KYC exercise will be required to be done
- at least every 2 years for high risk individuals and entities,
- at least every 8 years for medium risk individuals and entities,
- at least every 10 years for low risk and
taking into account whether and when client due diligence measures have previously been undertaken and the adequacy of data obtained.
- However, physical presence of clients may not be insisted at such periodic updations.
- It is a process by which banks obtain information about the identity and address of the customers.
- This process helps to ensure that banks’ services are not misused.
- The KYC procedure is to be completed by the banks while opening accounts and also periodically update the same.
Sources: The Hindu, RBI.