When it comes to extending financial products and services, customer identification holds key importance in helping keep the financial framework operational. For instance, when extending a loan, a lending institution must be well aware of an applicant’s financial profile. This is where the concept of know your customer and KYC documentation comes into the picture.
Given that financial frauds are at an all-time high in the present and growing, customer identification holds the key to vesting lending confidence in a financial institution. Here’s an elaboration on what the know your customer concept means and how its requirements can be fulfilled.
What is the concept of know your customer?
KYC or know your customer is a process introduced and integrated into all financial frameworks involving identified transactions to ensure identity and address verification of clients and customers. All financial institutions, insurance providers, and other companies facilitating financial transactions need to complete KYC verification before or during a financial transaction initiation.
The prevention of money laundering act, 2002 has mandated the use of KYC documentation to legitimise and track transactions for transparency and check on frauds and illegal activities. So RBI made it mandatory for lenders, insurance providers, and companies dealing in digital payments to complete the verification with every customer. The process must be completed even for the most basic purposes, like opening a savings account with a financial institution, making deposits and withdrawals. Availing credit is another aspect that requires you to complete strict KYC documentation.
For instance, if you plan to avail of an instant personal loan, you must complete this verification with the selected financial institution to initiate the loan processing. It is, however, applicable if you are approaching a new financier for the purpose. Cases where an individual already has an existing account or track previous transactions with the financial institution usually eliminate the step to fast-forward the processing with pre-existing KYC data. Pre-approved offers from lenders like Bajaj Finserv are decent instances of such integration. Knowing all about pre-approved personal loans can further ease financing availability.
The financial institution ensures simplified financing through quick and convenient loan processing under their pre-approved offers. Customers can avail of these offers on personal loans, credit cards, business loans, and a range of other financial products. You need to provide only your name and contact details to check your pre-approved offer.
When at it, you may check out other reasons to apply for a personal loan from such lenders.
The concept of eKYC
The digital process of KYC documentation and verification is commonly known as eKYC. It simplifies and fast-paces the on-boarding of new customers to enable easy completion of other processes.
The documents required for verification are the same. Only that, you can complete this process from the comfort of your home through necessary paperwork submission.
Types of KYC verification
KYC verification is completed primarily under two types:
- Aadhaar-based verification
It involves a completely online verification process. To complete such verification, all a customer needs to do is upload a photocopy of his/her Aadhaar card and confirm with OTP verification on the registered mobile number.
- In-person verification
It is an offline verification process that requires the individual to visit the financial institution or concerned company for process completion through document submission.
Situations requiring instant financing, such as personal loans, are best addressed through online KYC documentation and verification. You may check out more about the verification process of your personal loan before applying for funds to hasten the steps involved.
KYC documentation – Know the paperwork needed
The government of India specifies two sets of documents known as OVDs or officially valid documents for KYC process completion. Here’s an indicative list of both:
- Identity proof
Documents accepted as an individual’s proof of identity include Aadhaar card, PAN card, voter id card, driver’s license, passport, etc.
- Address proof
Documents like passport, Aadhaar card, bank account statements, utility bills, and the likes serve as address proof.
When seeking hassle-free approval of credit options, you must check the KYC documentation needs and abide by them accordingly. It is a part of all important documents required while applying for personal loans and the like. If you are new to the lender, it is best to keep all the documents ready to initiate the verification process immediately.