Capital market regulator Sebi today approved a uniform customer identification process for investors in different segments, and also decided to accept Aadhaar or UID as one of the eligible documents for fulfilling the KYC norms.
Currently, Know Your Customer (KYC) is done by all regulated intermediaries, like broker, mutual fund and portfolio manager, which resulted in duplication of work, wastage of record-keeping space. Besides, it is a burden on the intermediaries and the client seeking to make investments.
"We want to come with uniform and simple KYC regulation (and) for this, we will set up KYC regulation authority...this will help in creating inter-connectivity between different market segments," Sebi Chairman U K Sinha told reporters after its Board meeting. The Board also decided that the Unique Identification Document or Aadhaar number will be included in the eligible documents that can be presented as an identification of the customer as part of the KYC process.
To ensure that initial KYC is undertaken only once, the Board passed a proposal of setting up a mechanism wherein one or more regulated KYC Registration Agency (KRA) will undertake KYC at the stage of account opening for all clients. "The change in methodology of KYC process does not compromise PML (Prevention of Money Laundering) Rules and FATF (Financial Action Task Force) Standards; rather the proposed change will strengthen the uniformity of the conduct of KYC process," Sebi said.
All intermediaries can electronically rely upon KYC data of the KRA during the course of opening the account of their client. Sebi said the reliance upon services of a KRA performing elements of the KYC function will be determined by each intermediary. The benefits of a KRA system include the execution of a single and uniform KYC procedure across the securities market, saving of record keeping space, centralised storage and dissemination of data. It will also help in saving time and burden of procedure for clients by undertaking KYC procedure of identification only once, subject to periodic update.