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The soon-to-be-launched electronic know-your-customer (e-KYC) process, based on Aadhaar or unique identification number, would be a boon for the banking and financial services sector.
Pilot studies on e-KYC are underway. Based on the results of these studies, a launch is expected by December, say facilitators such as National Payments Corporation of India, Visa and MasterCard.
These organisations would act as a bridge between banks and financial service companies and the Unique Identification Authority of India.
“With e-KYC, you can actually do an online account opening in a bank, which will be much simpler. A lot of people in rural areas do not have the documents which we require for KYC. This will be a good instrument to get new accounts opened, especially in rural and un-banked areas,” said Sumant Kathpalia, head (consumer banking), IndusInd Bank. “This initiative will help banks like us to expand in rural and un-banked areas, along with our expansion in metros,” he added.
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In its physical form, the KYC process is completed by banks in five-seven working days. “Through e-KYC, the time taken would be reduced to three days and this way, a bank can save the time, money and manpower required for the verification process. Adoption of e-KYC is very important by banks, as well as insurance companies and fund houses. e-KYC will be a very cost-effective move for us,” said a senior Central Bank of India official.
The insurance industry would also stand to gain. K G Krishnamoorthy Rao, managing director and chief executive of Future Generali India Insurance, said, “This will lead to less documentation for insurance companies and customers. Further, all verifications can be done online, which will ease the overall processing.”
