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What is Re-KYC and Why Is It Required?
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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When you open a new bank account, you need to undergo a comprehensive verification procedure to establish your financial and identity creditworthiness. This process is addressed as KYC (know your customer), which is employed by most financial institutions to authenticate your submitted details. Mandated by regulatory bodies for all types of savings accounts, this step is considered essential to prevent fraud, money laundering and other monetary crimes.
Note that undergoing the process to compare savings accounts is not enough for a successful bank opening process. You must ensure to keep handy the required documents for e-KYC to open new bank account successfully. This process requires submitting crucial documents such as your PAN card, Aadhaar card, passport-sized photos, and others. Moreover, you may even be required to fill a KYC form. Here in this form, you must provide details regarding your income source, occupation, and purpose to open the bank savings account.
However, even after successful initial KYC completion, re-KYC might be needed under specific circumstances to ensure continued compliance with the regulations and to maintain banking system security.
What is re-KYC?
Re-KYC (re-know your customer) is a procedure of updating and authenticating your details periodically. It includes revalidating the data provided during your initial KYC procedure. This measure allows your financial institution to have your most accurate and current details, which assists in identifying and mitigating potential risks.
Why re-KYC may be required for bank savings accounts?
Periodic assessment
Re-KYC is required periodically, particularly for low-risk accounts such as bank savings accounts. The Reserve Bank of India (RBI) mandates that financial institutions perform re-KYC for such bank accounts at least every one to two years to maintain updated records. Periodic reviews also ensure any changes in your profile are captured on time, preventing any discrepancies.
Incomplete KYC during the account opening process
In cases where you have provided any incomplete or outdated detail during the initial KYC, performing a re-KYC can assist correct such inaccuracies and ensure your data is up to date. Such updated details are essential for future communication and transactions.
Change in your profile
Over time, your profile might witness considerable changes, such as a change of phone number, employment, or address. Re-KYC permits the financial institution to capture such changes and accurately maintain the records. By doing so, the institution can offer seamless services and ensure your data is in line with your current circumstances.
Better due diligence
Specific circumstances such as your transactional behaviour or higher risk perception might necessitate the need for due diligence. Re-KYC facilitates a comprehensive evaluation of your risk profile. For instance, consider if you start receiving unusually huge funds or show atypical account behaviour, the institution might need re-KYC to re-evaluate your risk level and authenticate the legitimacy of the banking transactions.
Ending note
Re-KYC plays an essential role in maintaining the banking system’s integrity. It assists in creating an updated and robust database, increasing the institution’s potential to assess and detect various suspicious transactions and reduce the risk of illegal activities and financial fraud. By revalidating periodically your information, financial institutions can also offer better-targeted banking services based on your existing financial profile.
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