RBI has provided the biggest fillip to digital in India: Rationalization of Compliance to KYC Requirements
Key changes made by RBI in KYC norms:
(a) Extending the scope of video KYC known as V-CIP (video-based customer identification process) for new categories of customers such as proprietorship firms, authorized signatories, and beneficial owners of Legal Entities and for periodic updation of KYC
1) MSME businesses had to go through paper-based account opening. With this change, Current Account Opening, as well as MSME Lending, will get the fillip as it can now be completely digital.
2) Digital SME Banks would be launched by Banks as well as Neo Banks in the next 6 months.
3) As there is no restriction on amounts, the valuation of Neobanks would go through the roof.
4) KYC updation was always a challenge, which would now be resolved through cheaper and safer options.
(b) conversion of limited KYC accounts opened on the basis of Aadhaar e-KYC authentication in non-face-to-face mode to fully KYC-compliant accounts
1) Cost of customer acquisition would come down substantially.
2) Digital Banks / Neobanks would scale up on immediate effect.
3) The valuation of Neobanks would go through the roof.
(c) enabling the use of KYC Identifier of Centralised KYC Registry (CKYCR) for V-CIP and submission of electronic documents (including identity documents issued through DigiLocker) as identity proof.
1) This would need a deeper understanding of the process. However, for sure CKYC, as well as Digilocker usage, would increase. This would also help in getting information on the address, which may be pulled from Digilocker documents.
(d) introduction of more customer-friendly options, including the use of digital channels for the purpose of periodic updation of KYC details of customers.
1) This would mean that customers would be able to mobile banking as well as internet banking for updating their KYC. This may work in an extremely simple way.
– Retail Customers: Using Mobile Banking / Internet Banking, complete OTP based KYC
– MSME / Corporate Customers: Using Mobile Banking / Internet Banking, complete periodic KYC for Proprietors / Authorised Signatories / BO through V CIP
Banks would significantly reduce ops as well as compliance costs.