by Mr. DHIRENDRA KUMAR,
The new central KYC registry has actually made
the KYC problem worse. Are you surprised?
“Central KYC Registry is a centralised repository
of KYC records of customers in the financial sector with uniform KYC norms and
inter-usability of KYC records across the sector with an objective to reduce
the burden of producing KYC documents and getting those verified every time the
customer creates a new relationship with a financial entity .“
The above sentences are taken from the home page
of the Central Registry of Securitisation Asset Reconstruction and Security
Interest of India (CERSAI), which manages the new central KYC registry that the
government has put in place.
Sounds nice? But if you have any experience of
the way the Indian bureaucracy functions, then you would probably react in
alarm.After years of KYC and `reKYC', and `re-re-KYC', you would instinctively
know what is coming. And you would be right. What the statement actually means
is this:
“We know
that you've got your KYC done with banks, mutual funds, depositories etc many
times over. However, now, in the name of unifying and centralising, we have
made new rules that have effectively invalidated all those. So back to the KYC
grind, all of you.Ha ha ha.“
We live in a country where a mere 64,000 people
have just confessed to having Rs. 65,250 crore of black money .
Most of us would guess that this is probably less
than 1% of the actual amount of black money in the country . And yet, if you
want to invest something like Rs. 50,000
to Rs. 1 lakh a year in a mutual fund, ` then you have to go through this KYC
tamasha repeatedly , year after year.
The contrast between the ease with which the rich
avoid taxes and the salaried middle-class has to jump through KYC hoops is
shameful.
The last several rounds of KYC have been done
whenever a rule is changed in the name of simplification or unification. This
new centralisation is no exception. There are actually two problems here.
The first is the huge gap between what central
KYC was supposed to achieve and how it has set about it. In his in augural
budget speech, Finance Minister Arun Jaitley referred to the `inter-usability
of KYC records across the entire financial sector'.
In implementation, this has been distorted to
mean the invalidation of a huge chunk of perfectly valid and genuine existing
KYC and the repetition of the KYC exercise for crores of customers. Did anyone
think of the cost and inconvenience to savers and investors?
Inevitably , there's a disproportionate impact on
smaller savers and investors. The kind of people who operate benami accounts
will have a squad of accountants and helpers to redo their KYCs quickly . In
contrast, small savers will have to take out time from work to re-prepare and
re-submit documents that they have already done a number of times earlier.
This government has proven itself to be genuinely
focussed on actual outcomes rather than just going through the motions of
following procedures. If, as the finance minister had said, reuse of KYC is the
desired outcome, then the new central KYC fails in that task. In fact, it takes
the small saver and investor away from that outcome. To achieve that goal,
existing KYC must be reused.
Which actually brings us to another important
point. Why must there be a uniform KYC requirement for everyone?
In activities like mutual fund or equity
investing, if all money comes in from a bank account and goes back to the same
bank account, why must independent KYC be required at all?
For such activities, why can't an existing
`KYC'ed' bank account be enough of identification?
This excessive and repeated KYC acts as a
financial exclusion tool for people who are less affluent. The less money you
have, the more likely it is that you simply won't be able to muster the time
and effort to be `KYC'ed' intensely and repeatedly .Is that the kind of outcome
the government is looking for?
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