Know Your Customer (KYC)

chickenidiots2I got an officious letter from my bank asking me to visit the branch with documents, for updating their “Know Your Customer” records. I thought I had given all the information that they needed to “know”, when they opened my account years back. Then it struck me that they wanted to “know” in the biblical sense ——Now Adam knew Eve, his wife; she conceived and bore Cain (Genesis 4:1, King James version). In other words: screw the customer! Not quite the sense the RBI intended. Let me explain. The original intent of the RBI was to prevent Money-laundering and other illegal activities through the banking system. They mandated banks to verify clients’ official documents like Passport, PAN etc., so that no benaami accounts are opened. Fair enough. The RBI also advised banks to periodically update their data, based on the risk perception; I quote from RBI’s website:

To ensure that the latest details about the customer are available, banks have been advised to periodically update the customer identification data based upon the risk category of the customers. Banks create a customer profile based on details about the customer like social/financial status, nature of business activity, information about his clients’ business and their location, the purpose and reason for opening the account, the expected origin of the funds to be used within the relationship and details of occupation/employment, sources of wealth or income, expected monthly remittance, expected monthly withdrawals etc. When the transactions in the account are observed not consistent with the profile, bank may ask for any additional details / documents as required. This is just to confirm that the account is not being used for any Money Laundering/Terrorist/Criminal activities.

I had not indulged in the said criminal activities before or after I opened the bank account; nor was there any change in my wealth (I never had any!). So what did they want? They took copies of my Passport and PAN card and stuck my photo on a pre-printed form. But that’s exactly what they did years back when they “admitted” me as a customer— can they not endorse that same form saying “no change”? No, that record has gone to the archives and is not accessible now. So, how would they compare that with my current declaration and “know” if a change has occurred? But this is only for RBI audit! In other words, they didn’t know what to do with the data then, they don’t know now, either! The Bank Manager said that this KYC was only for my Locker, and they would approach me on the appropriate anniversaries for my Fixed Deposit, Savings Bank and Overdraft!BanksGoGreen Afterword: This happened to me in a Public Sector Bank. To be fair, I had the same experience in a Multi-national Bank. (But both these banks have stopped sending me statements as part of a “go-green initiative”). To be even fairer, this stupidity prevails in varying degrees in most companies in the corporate sector. We collect data “just in case”. The Government does that too — it has vast unreconciled data about citizens from PAN, Passport, Driving-licence, Aadhaar, Voter-id etc. In our culture, data is a collector’s item, not a decision-making aid! Praise the Lord!


Aadhaar= Government identity proof

Benaami= Fraudulent proxy

PAN= Permanent Account Number (of the Income Tax Department)

RBI – Reserve Bank of India


6 thoughts on “Know Your Customer (KYC)

  1. Recently I had to give a KYC (updated) as you mentioned. They also wanted it for the locker. I asked why they could not use the same for the locker. And the response was that it was two different departments! So much for going green 🙂

  2. All of us are being harassed by the banks for KYC details. But as you have pointed out very succinctly, quoting the instructions from RBI, none of the staff of the bank didnt even so much as look through the info which had been filled into the form. I just cant figure out how the main purpose of this exercise viz., keeping the operations in the account under constant review, in order to detect abuse, will be served by such a casual and off hand attitude with which the info provided is used.

    Someone has to ring the bell at RBI to make them realise that their objective in this area is not being served at all.

  3. Pingback: Aadhaar Scheme: Absolutely Nir-Aadhaar | Kowie's Korner

  4. Pingback: KYC-II: What my Broker taught me | Kowie's Korner

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