A central KYC registry with standard norms and interoperability across all financial sectors has been established to operate as a repository for KYC records. It will allow banks, mutual funds, brokerage firms, and other depository participants to provide services without requiring additional KYC undertakings from customers. But will this add to the inconveniences and complicate procedures, or will it make things easier for everyone? In this article, we will share the pros and cons of CKYC
The Benefits of CKYC
CKYC is an excellent concept. According to the C-KYC rules, new clients must provide additional information included in the C KYC system. It would eliminate the need for a new KYC procedure every time a customer wishes to purchase mutual funds, which can be inconvenient. The C-KYC will be a one-time event.
The KYC procedure will be centralised and streamlined. Once you’ve met the CKYC requirements, you’ll be given a single customer identification code, which you’ll use at every point of transaction where KYC is necessary. It is, without a doubt, an elegant approach to the KYC procedure.
For the finance industry, central KYC is a game-changer. With the adoption of C-KYC, KYC duplication can be avoided. The applicable issuing authority will validate the supporting documentation, which would result in more reliable data and a reduced risk of forgery. KYC processes would be far less expensive. C-KYC would be applicable across various financial industries, allowing investors with bank accounts to invest in mutual funds or any other sector without completing any additional KYC requirements.
It has been a blessing for a successful investment path. The government will give the Central Registry of Securitization Asset Reconstruction and Security Interest of India (CERSAI) the authority to act and perform the functions of the Central KYC Records Registry (CKYCR), such as receiving, storing, safeguarding, and retrieving a client’s KYC records in digital form.
This reform will simplify the investment process, aid financial inclusion, and promote a saving and investing culture. Once implemented, c-KYC compliance will be added to the existing KRA process, a similar exercise.
Things that need to be Clarified or Improved
What the Sebi rules don’t say—and this is something that needs to be clarified—is what happens with KYC via Aadhar and OTP. In the KYC procedure, Aadhar was a great move. So, does the C-KYC work in tandem with the other processes, or is it a stand-alone system? These are some issues around centralised KYC that the sector has asked Sebi to clarify.
However, none of the CKYC criteria states do not talk about halting new transactions until CKYC is done. As a result, we anticipate business as usual and gradually implement any new regulations. Introducing a new system will always provide obstacles in terms of legality and implementation. However, once the requirements have been appropriately interpreted, we support implementing a shortened KYC procedure.
Creating a central KYC Registry is a good first step toward reducing KYC duplication in the banking sector. However, it is still only a first step and falls short in many areas. Your existing KYC is insufficient, and to migrate to the C-KYC, you must register a new KYC with an entity registered with the Central KYC system if you want to be a member of the C-KYC repository.
Second, because the C-KYC has not identified the PAN as a mandatory identification, but Sebi has enforced it even for C-KYC, the primary purpose of the Central KYC, interoperability between participants, may not be attainable. Thus, if you complete your C-KYC process without a PAN, it will not be valid with capital market participants like mutual funds or your depository participant.
CKYC is a step in the right direction and will make life easier for the investors, but it still needs more clarification.