KYC For Low -Risk Bank Customers

Old bank customers who have not complied with the know-your-customer (KYC) norms may soon receive notice from banks stating that their accounts could be partially frozen if they don’t furnish such details. The Reserve Bank of India (RBI) has made it mandatory that all bank customers, including lowrisk ones, should be KYC-compliant.

The central bank RBI said that those customers who have not complied with the KYC norms at all may face the risk of being barred from withdrawing cash from their accounts.

Credits would be allowed in such accounts, but debits would be al lowed if the customers are not KYC compliant. However, the account-holder will have the option to close the account and withdraw the money.

KYC norms were introduced in 2001 soon after the 911 attacks in America. However, many old customers, particularly the low-risk types — who have low value transactions — have not met the requirement.

“There’s a need for banks to complete the KYC details for all customers, including longstanding ‘low-risk’ customers.

Banks should complete the documentation, while minimising the effort on the part of the customer to what is strictly needed,” said Mr. Raghuram Rajan, Governor, RBI.

Meanwhile, the Reserve  bank has simplified the KYC norms for opening bank accounts. RBI has said that banks should not insist on physical presence of the customer or / seek fresh proof of identity & address at the time of periodic updating if there’s no change in the status of the low-risk customers.

Bankers say the RBI’s intention is to make the process easier. “Basically, the idea is to make the process easy to comply with.

But compliance has to be there,” said Arundhati Bhattacharya, chairman, State Bank of India.

“They have made it a little easier.They (RBI) have made self-certification possible. But even after making it easier, if people still don’t submit the details, then it leads to partial freezing of the account,” she said.

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