KYC Update: Along with preventing financial fraud or crime, KYC is seen as a weapon to prevent money laundering.
Know Your Customer: If a huge amount is kept in your bank account as bank balance and you have not done your KYC, then your difficulties may increase. The central government and the banking sector regulator Reserve Bank of India (RBI) are keeping an eye on those operative accounts which have huge bank balance but these account holders have not yet done their KYC. Through this exercise, efforts are being made to find out whether there is any risk regarding these accounts.
Keep an eye on their accounts!
This issue arose when the transactions done in these accounts came under scrutiny. Then it came to know that KYC of these bank accounts has not been done. These bank accounts belong to Trusts, Associations, Societies and Clubs besides High Net Worth Individuals (HNIs).
KYC mandatory till June 2023
RBI has instructed all banks to complete the periodic KYC update of their account holders by June 2023. Due to the Corona epidemic, the RBI had banned the freezing of non-KYC compliant accounts till March 2022. But after this time limit is over, the account holders are not getting their KYC done despite repeated requests from the banks. Banks can ask RBI to issue guidelines regarding freezing of non-KYC accounts.
Efforts to simplify the process of KYC
Presenting the budget for the financial year 2023-24, Finance Minister Nirmala Sitharaman had proposed to simplify the process of KYC. At present, the Finance Minister had emphasized on adopting a risk-based approach instead of one-size-fits-all rule. The Finance Minister had said that the regulators of the financial sector would be encouraged to completely adopt a better KYC system to meet the needs of Digital India.
Preparation for Central KYC!
Banks are constantly in talks with RBI to further strengthen the central KYC format to avoid multiple accounts with different identities in the banking system. At the same time, the government is considering amending the Banking Regulation Act,
Banking Companies Act and RBI Act, so that the protection of investors can be increased along with improving governance in banks. Along with preventing financial fraud or crime, KYC is considered necessary to prevent money laundering, which can be used to identify the real account holders.
