The Reserve Bank of India released a notification regarding extension of Risk based Internal Au...
As we all know KYC (know your customer) is basically the submission of a few documents, just as a proof of identity and existence of the customer. In a similar manner housing finance companies also have a KYC policy for all the existing and new depositors. In this blog, we will discuss the KYC policy for the housing finance company. For this, we will first try to understand the basic definition of housing finance company and then look into their KYC policy and why it is required?
As the name itself suggests, the primary objective of housing finance company is to finance the acquisition or construction of houses, including the development of plots of lands for building the new houses.
Now, let’s discuss the KYC guidelines one by one in detail.
For any housing financing company in India, their KYC policy basically involves the four crucial points to have a better customer understanding and the management of the risk-
Further, we will discuss these points one by one in detail.
Note- if there is an already existing customer, who becomes a politically exposed person (PEP), then approval from senior management is required to continue the business. There may be enhanced monitoring for such PEPs as well.
There is a Rule 9 of the Prevention of Money-Laundering (Maintenance of Records of the Nature and Value of Transactions, The Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005 (hereinafter referred to as PML Rules), requires every HFC:
In case of the commencement of an account-based relationship, the following needs to be inquired-
In other cases-
Verify the identity during the following instances:
Rule 9 also states that, in case of the beneficial owner, HFC would take all the reasonable steps to verify their identity. HFC would also conduct due diligence to verify the relationship between clients and their transactions.
HFCs obtain all the necessary information to their satisfaction in case of both regular and occasional customers. In accordance with the Rule 9 of the PML, this information/documentation is obtained for the identification of various types of customers i.e. individuals, companies, partnership firms, trusts, unincorporated association or a body of individuals and juridical persons.
Let’s take a look at the list of documents required by customers for Housing finance companies-
KYC document in case of individuals
|For name mentioned to HCF||Passport, PAN card, Voter’s identity card, drivers’ license, identity card (subject to HCFs validation), the letter issued by the recognized public authority or public servant verifying the identity and residence of the customer (subject to HFC’s validation)|
|Permanent Address of the customer||Telephone bill, bank account statement, the letter issued by any recognized public authority, electricity bill, ration card, the letter issued by the employer (subject to HFC validation)|
KYC documents in case of Company
|For the purpose of-|
Name of the company
principal place of business
the mailing address of the company
|· Certification of incorporation.|
· Memorandum & Article of association.
· Resolution from the board of directors and power of attorney granted to its managers, officers or employees to transact business on its behalf.
· An officially valid document in respect of managers, officers, or employees holding an attorney to transact on its behalf.
· Telephone bill.
KYC document in case of a partnership firms
|For the purpose of-|
Names of all partners and their addresses
Telephone numbers of the firm and partners
|Registration certificate if the firm is registered|
Power of Attorney granted to a partner or an employee of the firm to transact business on its behalf
Any officially valid document identifying the partners and the persons holding the Power of Attorney and their addresses.
Telephone Bill in the name of firm/partners.
KYC documents for trusts and foundations
|For the purpose of-|
Name of trustees, settlers, beneficiaries, and signatories
Names and addresses of the founder, the managers/directors and the beneficiaries
|Certificate of registration, the trust or foundation is registered|
Power of attorney granted to transact business on its behalf
Any officially valid document to identify the trustees, settlers, beneficiaries, and those holding power of attorney, founders/managers/ directors, and their address
Resolution of the managing body of the foundation/association
In case of the Unincorporated association or a body of individuals
|If there is an unincorporated association or a body of the individual||resolution of the managing body of such association or body of individuals.|
power of attorney granted to him to transact on its behalf.
an officially valid document in respect of the person holding an attorney to transact on its behalf.
and such other information as may be required by HFC to collectively establish the legal existence of such as association or body of individuals.
Every HFC must have a periodical review of risk categorization of accounts and keep a formulate due diligence whenever required.
If you are looking to form your own housing finance company or be a customer of any housing financing company in India. Then you must take care of the above rigorous KYC policy for housing finance companies mentioned above.
For more information please contact Enterslice.