Abstract
This paper outlines the regulatory framework and documentation requirements governing the Know Your Customer (KYC) process for opening various types of bank accounts in India. It integrates the provisions of the Prevention of Money Laundering Act, 2002 (PMLA) and the Reserve Bank of India (RBI) Master Directions on KYC, highlighting the risk-based approach, documentation standards, and compliance mechanisms applicable to different categories of customers and entities.
1. Introduction
The KYC framework serves as a cornerstone of financial integrity and anti–money laundering (AML) efforts in India. Every account-based relationship with a regulated entity (RE) must comply with the customer due diligence (CDD) requirements prescribed under the PMLA and the RBI’s Master Direction – Know Your Customer (KYC).
To open any bank account in India, an applicant must provide:
- • At least one Officially Valid Document (OVD) for identity and address verification
• A recent photograph
• A Permanent Account Number (PAN) or Form 60 (if PAN is unavailable)
Simplified norms permit a single OVD to serve both as proof of identity and address, eliminating the need for separate documentation in most cases.
2. Regulatory Foundation
The RBI’s KYC policy framework is based on four essential elements:
1. Customer Acceptance Policy (CAP)
2. Customer Identification Procedures (CIP)
3. Risk Categorization and Ongoing Monitoring
4. Internal Controls and Governance Mechanisms
The Officially Valid Documents (OVDs) recognized under the framework include the passport, driving licence, voter’s identity card, PAN card, NREGA job card, and Aadhaar-related documents (subject to e-KYC/V-CIP guidelines). Banks may use Aadhaar-based digital verification where permitted by law.
3. Individual Customers
For resident individuals, one OVD can serve as both proof of identity and address. Accepted documents include the passport, driving licence, voter ID, Aadhaar card, or NREGA job card.
Mandatory Requirements:
• PAN or Form 60
• Recent passport-sized photograph
Additional Requirements:
• For address verification: a utility bill (electricity, gas, water, or telephone) not older than two months, or any other government-issued document.
• For minors below 10 years: the KYC of the guardian operating the account is required; for others, the minor’s own KYC applies.
• For non-resident Indians (NRIs): notarized or attested copies of passport and residence visa are required, along with overseas address proof.
4. Risk-Based KYC and Simplified Accounts
Accounts opened using simplified or OTP-based e-KYC are subject to monetary and time restrictions. Such accounts must be upgraded to full KYC within one year, failing which operations may be restricted. The Central KYC Records Registry (CKYCR) assigns a unique KYC Identification Number (KIN), facilitating record retrieval and reuse across financial institutions.
5. KYC for Special Customer Categories
5.1 Minors
For minor accounts, the KYC of the guardian is initially obtained. Upon attaining majority, the account holder must complete full KYC and submit a fresh operating mandate. Schools or hostel addresses may be accepted for correspondence under bank discretion.
5.2 Senior Citizens and Students
The same OVD norms apply, with flexibility for correspondence address verification (e.g., utility bill within two months). Periodic KYC updates depend on the customer’s risk classification.
5.3 Non-Resident Indians (NRIs), Persons of Indian Origin (PIO), and Overseas Citizens of India (OCI)
Required documents include passport, visa or OCI card, overseas address proof, photographs, and attestations by authorized officials. Additional business or financial status evidence may be sought for NRE/NRO accounts.
6. KYC for Non-Individual Entities
6.1 Sole Proprietorships
The proprietor’s identity is established through OVDs. Any two of the following documents validate the business entity: registration certificate, municipal licence, GST certificate, income tax return, or utility bill. PAN in the firm’s name is mandatory.
6.2 Partnership Firms
Required documents include the partnership deed, registration certificate (if available), PAN, and OVDs of all partners. A resolution or authority letter must specify authorized signatories, and beneficial ownership must be identified in accordance with PMLA norms.
6.3 Companies
KYC for companies requires the certificate of incorporation, Memorandum and Articles of Association, PAN, list of directors, and a board resolution or power of attorney (POA) authorizing account operation. OVDs of directors, authorized signatories, and beneficial owners must be verified.
6.4 Trusts and Societies
Documents required include the registration certificate, trust deed or bye-laws, resolution, and OVDs of trustees, settlers, beneficiaries, and signatories. The bank must ascertain the control structure and purpose of the entity.
6.5 Associations, Clubs, and NGOs
These entities must provide a resolution for account opening, registration certificate or proof of existence, list of office bearers, and OVDs of authorized signatories and beneficial owners. Enhanced due diligence applies, especially for NGOs handling cross-border transactions.
6.6 Hindu Undivided Families (HUFs)
HUF accounts require the PAN, declaration of HUF, KYC of the Karta and coparceners, proof of address, and declaration of beneficial ownership.
7. Joint and Correspondent Accounts
Each joint account holder must undergo full KYC verification. The operating instructions (either/survivor, jointly, etc.) must be documented. Correspondent banking relationships require inter-bank due diligence without dilution of individual KYC requirements.
8. Periodic KYC Updating
The frequency of KYC review is linked to the customer’s risk category. Any change in signatories or beneficial owners mandates an immediate KYC update. Banks may collect only essential KYC data at onboarding, obtaining additional information later with explicit consent.
9. Consequences of Non-Compliance
Failure to complete or update KYC may lead to operational restrictions, freezing of accounts, or closure in accordance with RBI guidelines. Non-compliance can also attract penalties under the PMLA, and access to credit or card facilities may be suspended.
10. Digital and Remote Onboarding
RBI permits digital onboarding through Aadhaar e-KYC, XML-based KYC, digital KYC, and Video-Based Customer Identification Process (V-CIP), subject to prescribed safeguards. OTP-based accounts are temporary and must be converted to full KYC within stipulated timelines.
11. Practical Compliance Checklist
| Customer Type | Key KYC Requirements |
| Individuals | One OVD for identity and address, photo, PAN/Form 60, utility bill if needed; digital e-KYC/V-CIP allowed. |
| NRI/OCI | Passport, visa/OCI card, overseas address, photo, attestation; NRE/NRO declarations. |
| Proprietorship | OVDs of proprietor, any two entity proofs (GST, licence, ITR, registration), PAN, authorization. |
| Partnership | Deed, registration, PAN, partners’ OVDs, resolution, beneficial ownership details. |
| Company | Incorporation certificate, PAN, director list, board resolution/POA, OVDs of signatories/owners. |
| Trust/Society/NGO | Registration, constitution deed, resolution, POA, OVDs of trustees/beneficiaries, address proof. |
12. Conclusion
KYC compliance forms the foundation of India’s AML and counter-terrorism financing (CFT) framework. Banks must ensure that customer identification, verification, and ongoing monitoring are conducted in alignment with RBI Master Directions and institutional AML policies. Effective governance, documentation integrity, and adherence to risk-based CDD principles are vital for maintaining the safety and soundness of the banking system.
