The chief of the capital markets regulator, Sebi, Tuhin Kanta Pandey, recently said the regulator plans to launch a unified KYC across all financial institutions nationwide by July this year.
It is being designed on the lines of the government’s ‘One Nation One KYC’ plan across the financial sector. Union Finance Minister Nirmala Sitharaman also framework while addressing Sebi’s 38th foundation day event on 25 April.
This, Sitharaman pointed out, is a long-pending reform that has been discussed at meetings of the Financial Stability and Development Council.
Why is there a need for unified KYC?
This is important for to access an improved financial services experience with secure, portable KYC across financial institutions.
The goal of unified KYC is to make onboarding for investors (to enter financial markets) and loan seekers (to authenticate identification) seamless while ensuring data integrity.
How will it be different from the current KYC system?
Once rolled out, unified KYC would be an improved version of the current system. The current KYC system serves as a central repository for financial institutions to upload documents. This means customers have to submit KYC documents repeatedly across financial institutions.
But as the new system comes into force, once you complete KYC, it will be accessible to all financial institutions, including banks, mutual funds, NBFCs, insurers, and pension funds.
“For small investors and borrowers, CKYC 2.0 aims to eliminate one of the biggest friction points in the financial journey: repeatedly submitting the same KYC documents across banks, NBFCs, mutual fund platforms, and insurance providers,” says Kundan Shahi, Founder & CEO of Zavo.
Would lead to data safety: experts
Experts believe that unified KYC would also ensure the safety of personal data because of advanced . “CKYC 2.0 represents a significant change, moving from uncoordinated verification methods to a combined digital identification system. The primary emphasis of CKYC 2.0 will shift to the concept of privacy, which means that not only is your data physically retained, but that it is also defended through advanced tokenisation,” says Sarika Shetty, Co-founder & CEO, RentenPe.
To ensure data security, unified KYC is also expected to eliminate fraud stemming from impersonation.
“CKYC 2.0 would shift from a document-based process to a digital API based real time verification. Usage of facial biometrics is a welcome upgrade that will eliminate fraud perpetrated by impersonation/misuse of innocent citizens’ ID documents,” says Venkatesh Krishnamoorti, Co-Founder & CEO of Saafe, an account aggregator.
Key beneficiaries
Experts opine that the key beneficiaries of unified KYC would be retail investors and people in the lower-tier markets.
“The biggest beneficiaries of CKYC 2.0 will be people in the lower-tier markets who now have an easier way to access financial services. By streamlining the process for identifying eligible customers through their tiered markets, it will enable businesses to lower their customer acquisition costs and reach the missing middle of the economy,” adds Sarika Shetty of RentenPe.
“At a time when India’s retail investor base has crossed 18 crore demat accounts, CKYC 2.0 could play a defining role in making financial access faster, safer, and significantly more inclusive for the next wave of digital-first consumers,” adds Shahi of Zavo.
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