Finance Finance Business

Centralized KYC Registry: What is it and how does it work?

The Central KYC Registry is a centralized repository of KYC documents of customers who avail different services under the financial sector. This has been created with a view to reduce the burden of submitting KYC documents for verification at the instance of commencing a new financial relationship with a new finance company. In this article, we shall have a detailed understanding of the Central Know Your Customer Registry.

Centralized KYC Registry: Background

The Central Government has been bestowed with authority to frame various types of rules and regulations to curb the growing menace of black money under Section 73 of the Prevention of Money Laundering Act, 2002^[1].

Under this authority, the central government came up with Centralized KYC (Know Your Customer) to ensure one KYC for individuals to buy or to invest in financial instruments.

The Central Registry of Securitization Asset Reconstruction and Security Interest is the apex body that manages the CKYC registry.

What are the main features of the Centralized KYC Registry?

Following are its main features:

• It is a 14 digit number that is linked with the ID proof;
• The data of the customer is stored safely in an electronic format;
• The submitted documents are verified with the issuer; and
• Every concerned institution is notified whenever there is any change in the KYC details.

How does it work?

As specified above, the CKYC registry is formed to maintain the records of KYC in the form of a central repository and avoids the burden of submitting the KYC documents again for undertaking financial transactions.  When KYCs are submitted to the reporting entity, which is registered with the Central Registry of Securitization Asset Reconstruction and Security Interest, the reporting shall upload the details with supporting documents on the CKYC portal. 

A CKYC identifier, a 14 digit number, shall be given to the registered customer, which can be quoted by them to required financial institutions. As it is a centralized repository, financial institutions have access to KYC records; therefore, you won’t be required to submit your KYC documents for a financial transaction if registered. 

The reporting entity shall search and download the KYC details with the help of the CKYC identifier by entering a valid ID type and number. Therefore it is evident that with the assistance of the reporting entities, the Central Know Your Customer Registry functions and fosters the objective to minimize the burden of documentation and ease of financial transactions.

If you are a potential stock market or mutual fund investor, then you would undergo this process. When you approach a fund house with an intent to invest, you will be required to fill KYC form and submit the required documents. When you go to invest in another mutual fund house, then this time you won’t be required to submit the documents.  The mutual fund house can avail of the documents by submitting the CKYC number.

What are the types of CKYC accounts?

There are four types of CKYC accounts:

• Normal account-

A normal account is opened when you provide some official documents as identity proof. These documents include PAN, Aadhaar, Passport, DL, Voter ID, and NREGA job card.

• Simplified measures account-

This form of account can be opened on submitting other officially valid documents. This type of account should have the prefix “L” to it.

• Small account-

These type of accounts can be opened by providing a self-attested photograph and signed application. The KYC identifier for these accounts will have a prefix “S” to it.

• OTP based e-KYC account-

This account can be opened if you provide a photograph with an Aadhaar PDF file downloaded from the UIDAI website.

What are the advantages of the Central KYC Registry?

The advantages are mentioned below:

• With the help of the Central Know Your Customer registry, financial companies can easily verify the documents.
• The investors are not required to submit KYC documents again and again. This means that once you have filled the KYC form and submitted the required documents, when you go to invest in another mutual fund house, you won’t be required to submit the documents again.
• Investors shall have access to update their details on the Central Know Your Customer registry.
• One can use the CKYC number at the time of buying or investing in financial instruments.

How can financial institutions register with the Central KYC registry?

The below-mentioned steps should be followed to register with CKYC:

• Visit the official website of CKYC;
• Select register a new Financial institution;
• Enter admin details;
• Enter the details of the financial institution;
• Disclose the details of the regulating body that you are registered with;
• A minimum of two DSC is required;
• Submit the financial institution registration form with required documents;
• Once you submit the form, the system generates a temporary reference number; and
• The Central Registry of Securitization Asset Reconstruction and Security Interest shall verify your application, and if found correct, it will approve it.

Legal entities now under Centralized KYC

The Central Bank recently extended the applicability of the CKYC registry to legal entities, from individual accounts from 1^st April onwards. RBI stated that the central registry is fully operational for individual customers, and it has been decided to extend it to legal entities now.

It further stated that the regulated entities would be required to upload the KYC data pertaining to accounts of Legal entities opened on or after 1^st April 2021 to the Central Know Your Customer registry in terms of rule 9(1A) of the Prevention of Money Laundering Rules.

Regulated entities are required to make sure in case of accounts of Legal entities opened before the above-mentioned date that the KYC records are uploaded to the Central Know Your Customer registry during periodic updation or earlier. RBI further added that regulated entities shall upload the KYC data of accounts of individuals opened before 1^st January 2017 at the time of updation to ensure that all existing records are uploaded on CKYCR.

Conclusion

Centralized KYC registry is one of those reforms that is expected to make convenient and faster documentation process. The pile of paperwork which was needed earlier for initiating financial transactions, has been reduced.

Read our article:Central KYC Registry: A Concept Study