New Delhi, April 22: The Reserve Bank of India (RBI) issued a directive on Know Your Client (KYC) guidelines stating that both Aadhaar and Permanent Account Number (PAN) card will be made mandatory for opening of a bank account. RBI has decided to use Aadhaar for customer verification in order to ensure that no fraudulent account is opened. The RBI said that customers must provide Aadhaar and PAN card whenever the central government announces for the same but it also said the new norms were subjected to the final judgment of the Supreme Court on Aadhaar.
As per RBI, the decision to include both Aadhaar and PAN card had been introduced keeping in mind the laws surrounding the prevention of money laundering. Inclusion of Aadhaar and PAN will also ease the KYC process. People would be able to better manage their bank account based on eKYC, said an official. Moreover, for security purposes, customers will be marked as low, medium and high risk category, based on the assessment and risk perception of the RE.
Apart from the government banks, RBI has also directed entities regulated by itself, such as banks, non-banking finance companies (NBFCs), payment system providers (PSPs) and prepaid payment instrument issuers (PPI Issuer) to formulate a KYC policy which would include monitoring of customer transactions, risk management strategies and customer acceptance policy among others. In case of regulated entities (REs), they have to ensure that no account is opened where the RE is unable to apply appropriate customer due diligence (CDD) measures. RBI has also issued a notice saying additional information about a customer sought by the regulated entities as well entities regulated by RBI will be done with customer’s prior approval.
The customers who do not possess either the Aadhaar or PAN card, will have ‘small accounts’ opened by RBI itself. However, small accounts will be subjected to certain conditions, such as there will be a cap on the number of monthly and annual transactions. For opening the small account, customer’s self-attested photograph will be required and the account will be monitored from time to time to check any sort of fraudulent transactions. Complete biometric based electronic KYC authentication will also have to be completed by the customer for proper functioning.
Apart from all these guidelines, RBI also mentioned the importance of periodic updation of bank accounts which is carried out through PAN verification and the authentication of Aadhaar. The RBI stated that periodic updation must be carried out once in two years, eight years and ten years for high risk, medium risk and low risk customers respectively.