The Reserve Bank of India, on January 9, has amended the Know Your Customer (KYC) guidelines to allow banks, lending companies and fintech startups to onboard customers remotely. It has allowed for the video-based KYC of customers of financial institutions, thereby incorporating the changes made to Prevention of Money Laundering rules by the central government.
Doing away with mandatory physical documentation and in-person verification, the central bank has allowed for the use of a live photo of the customer, and his or her officially valid document as a proof of identification. It has also mandated for the geo-tagging of the customer's video to ensure that they are located within the borders of the country.
RBI has not only allowed KYC documents to be submitted electronically, but also given the green light to accept digitally signed documents, and documents issued to the digital locker account of the customer, as proof for the opening of an account. A Digi-Locker, as it is popularly called, allows citizens to store their personal documents online.
“This is a good start to the new year,” said Rudrajeet Desai, founder of WorkApps, which offers a video KYC solution to banks and other financial institutes. “This will definitely drive financial inclusion and help strengthen the country’s economy.”
Others like Saru Tumuluri, CEO of Khosla Ventures-backed Veri5Digital said that the general direction the RBI is taking by allowing the use of Video ID for KYC is extremely positive and shows its commitment towards digitisation and financial inclusion.
“Though there is still some clarity that would be required in terms of the actual use, one thing is certain that use of offline Aadhaar-based KYC, along with, video ID KYC, would drive an upward trend in the financial sector,” said Tumuluri.
With respect to the use of Aadhaar, while banks can still use online Aadhaar verification in case of customers who agree to share their Aadhaar details, other regulated entities would have to rely on offline Aadhaar. This means that customers will have to either use Aadhaar XML files or Aadhaar Secure QR code for offline KYC.
“While overall this is a major positive move, this is the only point where there could be some hindrances since consumers in rural and far flung geographies might still find it difficult to use these facilities for offline Aadhaar, but this will get smoothened soon,” said Wriju Ray, cofounder of Mumbai-based digital identification solutions startup IDfy.