What is KYC ? Where it is used and Why ?
What is the full form of KYC ?
The full form of KYC is "Know Your Customer".
The main purpose of KYC is to prevent banks from being used, by criminals for money laundering activities and financial frauds.
The idea is taken from USA. After the 9/11 attacks, the US passed a laws for KYC as part of the Patriot Act. In US, KYC concept was introduced in the 1990s to fight money laundering.
Similarly, India adopted KYC concept for banking, demat account, mobile connection, LPG gas connection & other utility services etc.
As per RBI guidelines, firstly KYC is done the, then your account is opened. You can provide any of the following document:
- Passport
- Aadhar Card
- Voter Card
- Driving Licence.
- NREGA Card.
- PAN Card
Basically, the purpose is to verify your address.
Banks or companies can get your details by these documents.
If you have a bank account you get the transaction amount more than 1 lakh in his account, then the information is automatically sent to the banks. If they think, something illegal is going on, then your account will get freeze. It will not be closed i.e., you can deposit the money but can not withdraw it. To withdraw it, you have to move to Bank manager, he will say according to RBI, we need KYC. So, give you aadhar card, PAN card and photo so that they can know you.
In case, you have a current account, then you have to provide the RC as well. RC is the registration certificate of your business.
After completing your KYC, your account is activated.