Direct transfer hurts banks’ KYC norms

In its hurry to spread the direct transfer scheme aimed at aiding beneficiaries of government welfare schemes, India's bankers may be slackening on a key regulatory requirement — Know Your Customer (KYC) norms. Mahua Venkatesh reports.

In its hurry to spread the direct transfer scheme aimed at aiding beneficiaries of government welfare schemes, India's bankers may be slackening on a key regulatory requirement — Know Your Customer (KYC) norms.

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Bankers who did want to be identified told HT that lenders are under pressure to cover as many unbanked households as possible as possible by 2014 — an election year — and this often involves the process of checking the antecedents of customers.

“When we deal with rural customers, we find in most cases that they do not have the required documents and we relax norms for them with a view to bringing them under the banking net, at this point financial inclusion is critical,” a source said.

Recently, investigative website Cobrapost revealed that several banks — public and private — have failed to adhere to the KYC norms.

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While banks have been directed to cover atleast one household by 2014, the centre is keeping a close eye on the progress of expansion of branch network and addition of unbanked households into the financial services net.

“With such pressure to expand banking network, it is natural that there are a few lapses,” a senior bank executive said.

In the previous financial year, more than 70 lakh no-frill accounts have been opened. The government has asked banks to focus on areas where the penetration of banking net is low.