scorecardresearchCentralized KYC: What is it and how does it work? All you need to know

Centralized KYC: What is it and how does it work? All you need to know

Updated: 12 Jan 2023, 08:00 AM IST
TL;DR.
A centralized KYC is a variation of KYC that intends to utilize a single KYC for all kinds of services in the financial industry. Once you have finished the registration, you will be given a 14-digit code that serves as your CKYC number.
Once you have finished the registration, you will be given a 14-digit code that serves as your CKYC number.

Once you have finished the registration, you will be given a 14-digit code that serves as your CKYC number.

When you create a bank account or invest in mutual funds or stocks, you must go through a verification process. In order to guard against identity theft, the verification procedure verifies your identification twice and stores your information in a database.

The verification procedure is referred to as the Know Your Customer (KYC) process. A centralized KYC is a variation of KYC that intends to utilize a single KYC for all kinds of services in the financial industry.

The central government established CKYC to ensure that each individual purchasing or investing in financial products underwent a single KYC.

Once you have finished your CKYC registration, you will be given a 14-digit code that serves as your CKYC number. The number is associated with your government ID. The main organization in charge of running the CKYC registration is called the Central Registry of Securitization Asset Reconstruction and Security Interest (CERSAI).

How does CKYC work?

You must go through the CKYC procedure if you're a prospective investor. When you contact an institution to make an investment, it will first demand you to complete your KYC and provide the necessary paperwork. These papers will subsequently be forwarded to CERSAI, which will assign you a unique 14-digit KYC number.

After getting your CKYC number, you don't have to go through the KYC procedure every time you want to start an investment. By providing your KYC number and asking CERSAI to provide your paperwork, institutions will make investing hassle-free for you.

The mandatory registration of their clients under CKYC is required of all financial institutions licensed by SEBI (Securities & Exchange Board of India), IRDAI (Insurance Regulatory and Development Authority of India), RBI (Reserve Bank of India), and PFRDA (Pension Fund Regulatory & Development Authority).

What are different types of CKYC accounts?

  1. Normal account- A normal account will be created when you submit any of the following documents: PAN, Aadhar, driving license, voter ID, passport or MGNREGA card.
  2. Simplified account- When none of the aforementioned documents are available, you could submit other officially verified documents that the RBI has listed, such as bank account statements, property tax receipts, telephone bills that are no older than two months.
  3. Small account- If you don't have legally recognized identification, you can create a Small CKYC Account by submitting a completed application and a photo. However, these accounts will have limited validity and be subject to transaction limits.
  4. OTP-based eKYC account- When you submit an Aadhar-based PDF file that was obtained from the UIDAI website and was enabled by an OTP, this account will be created.

When creating other accounts, including bank accounts, demat and trading accounts, etc., you may provide your CKYC number to immediately finish the verification procedure. In India's emerging financial sectors, document verification is simple and convenient with CKYC.

Article
When a resident wants to get his e-KYC done, he can download the KYC XML.
First Published: 12 Jan 2023, 08:00 AM IST