Banks To Secure Account With Extra KYC Verification Layers

Banks are in the process of improving their KYC (Know Your Customer) standards by adding extra verification layers to identify accounts and account holders. As per the plan being discussed with the Reserve Bank of India (RBI) and the government, banks would update all existing accounts, particularly those with a single phone number linked to multiple or joint accounts.

Furthermore, banks would seek additional verification from individuals having multiple accounts opened with different documents. This initiative comes at a time when the government has created a committee led by Finance Secretary TV Somanathan to standardise and ensure KYC norms are interoperable across the financial sector.

"We are looking at multi-level secondary identifiers such as PAN, Aadhaar, and unique mobile number (UMN) for joint accounts as well," said a senior bank executive aware of the matter.

The secondary identifiers will facilitate the tracing of multiple accounts of an individual if they are not linked and are opened with different KYC documents. "This will also help in extending the account aggregator, or AA network, to joint accounts," said the aforementioned bank executive.

Currently, only single-operated individual accounts have been included for sharing financial information under the AA framework. An account aggregator is a system that collects information related to a customer's financial assets from various sources and presents it to authorized users. Currently, Indian citizens can use several documents, including a passport, Aadhaar, voter card, NREGA card, PAN card, or driving license, to open a bank account.

Last month, the Finance Stability and Development Council (FSDC) discussed the need for uniform KYC norms, inter-operability of KYC records across the financial sector, and simplification and digitalization of the KYC process.

Some bankers have expressed concern about slackened KYC norms by fintech companies and the lack of reporting to credit bureaus by some of these firms. This increases the risk for other lenders who rely on data available through credit bureaus. The Indian Banks' Association (IBA) has represented these concerns to the RBI over the last year.