What is KYC? Why is it necessary everywhere from bank to mobile?

Nowadays, whenever you open a bank account, get a SIM card or want to take advantage of any financial service, the first thing you hear is KYC. But have you ever wondered what KYC is and why it has become so important? Understand about it in easy words here.

What does KYC mean?

The full form of KYC is Know Your Customer. Its Hindi meaning is identify your customer. This is a process in which the company, bank or any service providing organization insures that their customer is real. There is no one who is fake or fraudulent.

What are the documents required for KYC?

To do KYC, you have to provide some documents related to your identity and address. This includes Aadhaar card, PAN card, passport, voter ID card and driving license. Your identity is confirmed by giving copies of these documents and sometimes through live photo or video verification.

Why is KYC important in the bank?

KYC is very important in the banking sector as it reduces the chances of money laundering and fraud. The bank confirms that you are the same person who is opening the account. Without KYC, the bank can only give you limited service. If you do not get the KYC done on time, your account may also be frozen.

Why is KYC required while buying a mobile SIM?

Mobile operators want to see whether the SIM is in the name of the real person or not. This provides protection against forgery, fake calls and spam. Before SIM activation, Aadhaar-based eKYC has now become very normal, in which identity verification is done only by OTP.

KYC is also required in digital apps and wallets

If you use Paytm, PhonePe, Google Pay or any digital wallet, you may have noticed that you can only make limited transactions without KYC. KYC is required for full access.

How many ways is KYC done?

Physical KYC is done by photographing the document and filling out the form. The second way is eKYC. This is done with Aadhaar OTP. Video KYC confirms identity through a live video call.