The Reserve Bank of India has made it mandatory for banks, financial institutions and other organisations to verify identity and address of all customers who carry out financial transactions with them. To do it without much hassles, KYC method is used in. KYC or Know Your Customer is a process through which a bank or an institution verifies the identity and address of an individual.
What is KYC?
KYC enables an institution to authenticate the identity and address of an investor. A customer has to submit his KYC before he starts investing in various instruments such as mutual funds, fixed deposits, bank accounts, etc. However, an individual has to do it only once when he starts investing for the first time.
KYC is one such method which ensures that banks are not used for carrying out money laundering activities.
KYC came into existence in 2002 in India and RBI, in 2004, made it mandatory for all banks to carry out KYC of customers by December 2005.