Central Know Your Customer is known as CKYC. If you want to invest in mutual funds, you have to go through the CKYC process. It helps the financial institution to get relevant information about the potential customers available.
You may open a bank account where several documents are needed such as your signature, terms of orders, etc. It can be a very long process if there is no CKYC.
The advantage of having a CKYC is that it works for both the individual and financial institutions. All financial institutions are using CKYC to skip the hassle of producing your KYC document.
It also helps to lessen the friction that many banks face while acquiring a customer through KYC verification.
According to the Website, "Central KYC Registry is Centralize Storing of the KYC record of the clients in the financial entity with the uniform KYC Norms and Inter adoption of the KYC records across the sector to decline the stress of the creating KYC Documents and getting it checked whenever they customer builds a new relationship with a financial institution."
Why Central KYC?
Before the CKYC initiative, you had a separate KYC for different types of processes. It consists of buying insurance, opening a bank account, investing in mutual funds, etc. You just have to complete it once with the help of the CKYC. It will replace all other KYC processes.
The main goal of the CKYC is to give you a platform that enables the customer to complete their credential at once to join several financial institutions.
On the other hand, it has a significant advantage that there is no more duplicacy of data, which saves time and cost. A 14-digit KYC registration number is given when you finish the process of the registration. You just have to provide the number whenever you join a financial institution.
What is CKYC?
According to Section73 of the Money Laundering Act's prevention, 2002, the Central government has the power to frame several rules and regulations to keep a check on the black money.
With the authority's help, the central government started CKYC to ensure one KYC for individuals to purchase or invest in the financial sector.
CERSAI is the main body that manages the CKYC registry. It is a short form of Central Registry of Securitization Asset Reconstruction and Security Interest.
A government gives the power to act and perform the different tasks of the Central KYC registry under the PMLA rule, 2005. It consists of receiving, storing, retrieving, and safeguarding the record of KYC in a digital form.
CKYC is an initiative of the Government of India to build a structure that allows you to finish the KYC before joining the financial entity. They keep all KYC records so all financial institutions can use to check records of investors in the sector.
Features of the CKYC
What is KYC?
What is the difference between eKYC, CKYC, and KYC?
KYC is Know Your Customer. Whether it is a mutual fund or a bank, you have to verify your identity on the written details submitted in a form. Verification is completed based on the submission of the correctly filled KYC form and the required documents.
The IPV process supplements it. It is a process that checks the documents and identity of the person for which KYC is completed. Once you complete the verification, then relevant investor data is entered into the KRA Registration Agency.
E-KYC or Electronic KYC
It is a process that uses an Aadhar Card of the customer. There are two ways to verify the identity of the customers in the process of EKYC:
- 1OTP (One Time Password) - You will get an OTP on your phone. On completion of verification, you can invest up to 50,000 per year per mutual fund house.
- 2Biometric Verification - In this verification system, you can invest without any limitation unless those executed by the scheme or fund house. All the data is entered into the KRA Registration Agency.
It is a government initiative that builds to create a structure where you have to do your KYC only once. It helps investors to transact or join with all the institutions regulated by the Government of India Regulators.
In this initiative, there is no need to complete multiple KYC formalities. It saves time and effort. It helps you to invest without any burden and make your financial journey easier.
How does CKYC work?
In the rapid execution of CKYC, any person can approach financial institutions regulated by the RBI, SEBI, and PFRDA to complete the process. It is necessary to go through the process of CKYC if you are investing your money into the Mutual Fund or Stock Market.
When you put your money in any Fund House you have to submit KYC and other related documents. All of your documents will be sent to CERSAI. You need photocopies of the documents along with the CKYC form. All the documents have to be physically verified.
After the verification, a 14-digit CKYC number is given. The benefit is when you invest your money in another Fund House, then you don't need to provide all your documents again.
In the case of NRI investors, you are authorized to KYC attest and go for the IPV when you are in India. You have to confirm that you are an NRI during the submission of the KYC form.
The Mutual Fund will ask CERSAI to furnish your documents through your 14digit number. It takes the stress of the process out of your head and makes your investing process smoother. You can approach Mutual Fund distributors to help with the central KYC process.
CKYC status check online
At present, there is no way to check the KYC status online. There are some KRAs launching a column in the KYC to check status. It is currently blank, but there are chances that it will start soon.
If you get the 14 digits after verifying the documents then it means the process is completed. A CKYC application is deemed successful.
Several financial services help you to check your CKYC number from going through the below steps:
The KIN is given to you in 4 or 5 working days. When the KIN is generated, then an SMS will be sent to your registered mobile number. It is a 14-digit number for your KYC account.
Don't forget to give your email id and phone number; otherwise, CERSAI won't be able to send any confirmation to you in a physical form.
In the case of disagreement, your application might get rejected. You won't get any kind of information about it. A financial institute will know about the situation so you can stay in touch with them.
How to check your KYC status using Pan Card
How to be Central KYC compliant?
It has been initiated to make the life of a customer more comfortable and stress-free. By finishing the process of CKYC with any financial institution, nobody has to follow the whole process again.
CKYC will store digitally in the one platform that is accessible to all financial entities. Before the CKYC initiative, you have to go through the separate KYC process for a different type of financial entity.
The purpose of introducing the central KYC is to get rid of this dissimilarity across several platforms. To be a CKYC complaint, you have to fill in a form. Along with the fill-up form you have to send a self-attested copy of the proof of address and proof of identity, scanned signature and photo needs to be submitted.
There are several other fields that you have to fill up. If your form is correctly filled up, then your KYC account will be opened. After finishing a form and its successful verification, you will get the 14-digit number.
You just have to use this number whenever you tie-up with a financial institution. The number will have all your data saved centrally.
What is a CKYC number?
It is a 14-digit number known as KYC Identification Number. After the process of verification, that number will be given to you. It is only available for eligible applications within 4 or 5 days. An SMS will be sent to you when KIN generated.
How to get a CKYC number?
There are two ways to get a CKYC number if you are a potential investor of Mutual Funds.
You can even do it yourself by going to the CAMS office. You have to submit all your documents with the form. It is similar to filling up a KYC form by providing supporting documents such as identity proof, Aadhar card, and address proof. There is one extra field that Central KYC looks for - the name of your mother.
Why are there so many ways to do KYC?
Money laundering is one of the problems that is growing rapidly. Financial institutions face risks such as drug trafficking, money laundering, organized crime, etc. It leads to taking notes of the investors and collecting the data from them.
CKYC initiative of the government enables people to finish their KYC formalities in a fast and easy way.
Impact on the existing mutual fund investor
If you have already invested in the Mutual Fund House, you don't need to undergo CKYC. It may change shortly. If you want to invest in another Mutual Fund House then you may have to go through the CKYC process.
On the other hand, new investors must submit the CKYC form along with the application. It is only applicable to individuals.
Documents needed to complete the CKYC formalities
You have to submit the following documents
After the submission of documents, they will upload it to the CKYC platform. It will take a few days for verification of the documents.
What if you don't have an Email Id or phone number?
Whenever KIN is generated, CERSAI sends you a 14-digit number via SMS or Email. If you don't have both, then there will be no communication between you and CERSAI.
In such a case, an investor has to reach out to the financial entity to which the form was submitted. You have to give all the detailed documents that you submitted already.
For example, if you have submitted the PAN as an identity proof, you have to offer a PAN. It is useful if you provide your email ID or phone number to get your CKYC number. You won't miss any communication with the CERSAI.
Is CERSAI accountable for the validation of investor data?
It will verify the documents against all data submitted by people. They will only complete the CKYC process when they double-check the document of customers. It must have to lie correctly during the CKYC process.
How to fill a CKYC form?
There are several sections that you need to complete. It consists of personal details, tax jurisdiction, contact details, address proof, related persons, declaration, etc. The same form is used for the existing investors too. A piece of information is given in the back of the way to fill all the sections.
Type of CKYC account
At present, there are four types of CKYC account:
Normal KYC account
It is created when you give any of the following six documents: PAN number, Aadhar Card, Voter Id, Passport, Driving license, and NREGA job.
Low-Risk KYC or Simplified KYC
If a holder cannot submit above six officially valid documents, it is called "Low Risk" by banks. These are the customers that face issues in providing the identity. If you are one of those customers, then you can do CKYC by following the below steps.
If you don't have any documents, you can open a small account with the banks. It can be opened by giving the self-attested photograph along with the sign application. It is only valid for 12 months.
It can be valid for the next 12 months if a client creates a document that they have applied for the authentic documents. In this type, KYC account comes with the prefix of "S"
There are several drawbacks in small accounts
OTP based eKYC account
You have to give Adhar file downloaded from the UIDAI website along with the photograph. It is open by OTP. In this type, KYC account comes with the prefix of "O".
The benefits of CKYC registry
- 1Data Retrieval - It is effortless for a financial institution to look at the customer's KYC data and download it. They just have to visit the CKYC database with the help of the 14 digit number. The retrieval can be done in bulk or single file as well.
- 2Data Updation - The best thing about the CKYC is whenever investors update their data, all the connected financial institutions get a notification about an update.
- 3Mobile Registration - The KIN will not be given first hand. It is one of those processes that take time to verify. After the verification, the KIN will generate and send you on the registered mobile number.
- 4Redundancy checker - Based on the demography and ID, all the investors' data will be checked for duplication and redundancies. It will be given with the similar case of the resolution.
- 5Business Impact - It has a significant impact on investors and financial institutions. It is time-saving and cost-saving for both. The benefit of collecting all the data is investors, and financial institutions can focus on managing an agenda conducting business smoothly.
- 6Charging for data handling - Financial Institutions have to pay to get access to investors' data. Here are the rates that apply for it.
Why was Central KYC bought into action?
It is an initiative that starts to get all the financial entity clients on a uniform and single KYC platform. Before CKYC, you needed to complete all the KYC formalities separately for each financial entity such as a mutual fund company, bank, etc.
Financial entities can access when Central KYC norms are completed. The Central KYC processes help to collect data of the investors that are stored digitally. It supports financial entities to avoid redoing KYC for each customer.
Financial institutions have several benefits, such as checking that customers' data is compliant or not, retrieving their data, and taking the data and not asking for investors.
It makes the process of investing smoother. It makes sure that customers don't disturb each time by asking the same data again. Financial entities such as RBI, SEBI, IRDA &PFRDA can connect with CERSAI to perform CKYC.
New norms in the Central KYC
It is a process that is accepted by all the financial entities and promoted by the government, PSU banks, and other financial institutions. It is also called the mother of all the KYC process.
According to SEBI, all the market intermediates must have to register for the KYC detail of the entire customer on CERSAI's online platform. It is in the comparison of the old methods of registration through KRAs.
All the intermediates have to join and register with the CERSAI. Even some financial entities have to hand over their KYC records to CERSAI. There is a small drawback that if you want to invest in mutual funds or any other financial entity, then you have to give more than Aadhar card and PAN card.
CKYC several essential details such as the name of the mother, maiden name, details about the minor's related person, proof of the permanent address, etc.
Challenges with CKYC
There are several advantages of CKYC, but it comes with challenges. There are several problems with incorporating CKYC in the system. Here are some major challenges with CKYC.
A change for a better future
There are many execution problems with the CKYC initiative, such as technical glitches and gradual handover of data. It is the process that replaces the Aadhar and PAN verification.
When there is a need for more information about the investor, they need to go through the whole KYC process again. After an introduction of CKYC, they make the investment process more comfortable. They spread the culture of saving and transparent investment.
It eliminates waste of time, resources, and manpower. It makes the system more efficient. There is no doubt that there are some issues at the beginning of the initiatives, but they will be sorted out by taking significant action against them. It is one of the most beneficial initiatives for both customer and financial institutions in the long run.
In the modern world, people want things in such a way that everything is done in a few minutes. The old method takes time and people have to put in the time to complete it. With the introduction of the CKYC, the process becomes quicker, smoother, and safer.