KYC/AML guidelines for opening bank account made simple

RBI has been imposing heavy penalties on banks who have not complied or the account opened in contravention of various directions and instruction issued by it, which includes failure to obtain adequate documents for opening accounts, failure to carry out identification procedures, failure to examine control structure of entities. However, with a view to helping the common man in opening bank accounts, RBI has recently made some changes in KYC process.

1. If, officially valid document submitted by the customer contains proof of identity and proof of address then that itself is the sufficient document for proof of identity and proof of address. Earlier customers were required to submit two separate documents viz. one for proof of identity and the other for proof of address.
2. Now it is not a prerequisite for a customer to submit the proof of current address for opening bank account or while undergoing  the periodic update. If the customer does not have the proof of current address which is different from permanent address available on the proof of address, a simple declaration by the customer about his/her current address for communication would be sufficient.
3. While transferring accounts from one branch to another of the same bank, no separate KYC documentation is required, if it is already done by one of the branches of the bank. A simple declaration by the customer about her/his current address for communication would be sufficient.

Valid document  for Change in name on account of marriage or otherwise

The Government of India has since amended the prevention of money laundering rules 2005, keeping in mind the problems faced by the person who changes their name due to marriage or otherwise, in submitting ‘officially valid documents’. In rule 2 (1) clause (d) of PML third amendment, an explanation is inserted which reads as under.

“Explanation: For the purpose of this clause, a document shall be deemed as ‘officially valid document’even if there is a change in the name subsequent to its issuance, provided it is supported by a marriage certificate issued by the State Government or a Gazette notification indicating such change of name.”

As a result of above amendment to PML rules, RBI vide its notification RBI/2015-16/213-DBR. AML.BC. No. 46/14.01.001/2015-16 of October 29, 2015 advised to all Scheduled Commercial Banks/ Regional Rural Banks/ Local Area Banks and all financial institutions (including NBFCs, Primary (Urban) Co-operative Banks,State and Central Co-operative Banks (StCBs / CCBs),all Payment System Providers/ System Participants and Prepaid Payment Instrument Issuers, all authorised persons including those who are agents of Money Transfer Service Scheme)  that  they may accept a copy of marriage certificate issued by the State Government or a Gazzete notification indicating such change of name together with a certified copy of the ‘officially valid document’ in existing name of the person while establishing an account based relationship or while undergoing periodic updation exercise.

What are Official Valid Documents (OVDs) for KYC purpose?

The following documents are considered as the Officially Valid Documents (OVDs) for KYC purpose.

(a) Aadhaar card issued by UIDAI (In terms of RBI circular dated 17.07.2014 on KYC guidelines, the information containing personal      details like name, address, age, gender, etc., and photographs made available from UIDAI as a result of e-KYC process can also be treated as an ‘Officially Valid Document’.)

(b) Voter ID card.  *Permanent account number (PAN) card,

(c) Driving licence,

(d) Passport,

(e) NREGA Job card.

Utility bills, ration cards are no more treated as valid documents

In the earlier definition “any other document as may be required by the banking company or financial institution or intermediary” was considered as valid document. But this line has now been replaced with “any document notified by the central government”. Therefore, new dispensation changes the scope for accepting utility bills; ration cards etc. for opening bank account.

Relaxation regarding officially valid documents (OVDs)

If a person is categorised as ‘low risk’ by the banks, but he/she does not have any of the ‘officially valid documents’ mentioned above. In such cases banks may still open his/her account by obtaining any one of the following documents:

(a.)  identity card with applicant’s photograph issued by Central/State Government Departments, Statutory/Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, and Public Financial Institutions;

(b.)  Letter issued by a gazetted officer, with a duly attested photograph of the person.

Small Accounts

Those persons who do not have any of the ‘officially valid documents’ can open ‘small accounts’ with banks. A ‘small account’ can be opened on the basis of a self-attested photograph and putting her/his signature or thumb print in the presence of an official of the bank. Such accounts would be subject to conditions stipulated as under.

1. the aggregate  of all credits in a financial year does not exceed rupees one lakh;
2. the aggregate  of all withdrawals and transfers in a month  does not exceed rupees ten thousand; and

• the balance  at any point of time  does not exceed rupees  fifty thousand.

1. Foreign remittances cannot be credited to Small Accounts without completing normal KYC formalities.
2. Small accounts are valid for a period of 12 months initially which may be extended by another 12 months if the person provides proof of having applied for an Officially Valid Document.
3. Thereafter, such accounts would be allowed to continue for a further period of twelve more months, if the account holder provides a document showing that she/he has applied for any of the officially valid document, within twelve months of opening the small account.

Other relaxations

KYC verification of all the members of Self Help Groups (SHGs) is not required while opening the savings bank account of the SHG and KYC verification of only the officials of the SHGs would suffice. No separate KYC verification is needed at the time of credit linking the SHG.

Foreign students have been allowed a time of one month for furnishing the proof of local address.

In case a customer categorised as low risk is unable to submit the KYC documents due to genuine reasons, she/he may submit the documents to the bank within a period of six months from the date of opening account.

Photographs of the customer for the bank’s record:

While opening any type of accounts viz. Savings Bank, Current Accounts, Term Deposits, Recurring Deposits, or loan accounts, all the depositors  /account holders have to submit two copies of latest photographs for the bank’s record. This condition of submitting photographs applies to all categories of depositors including proprietor, partners, trustees, settlers, beneficiaries and those holding power of attorney, founders, managers, directors etc., whether resident or non-resident. It is compulsory to submit Photographs of all the persons who are authorised to operate the accounts without exception including ‘Pardanishin‘ women. However, there is no need to submit separate photographs for each category of deposit or an additional account is desired to be opened by the existing account holders. In case, of term deposits photographs of all depositors in whose names the deposit receipt stands are required to be submitted. In case of deposits/accounts in the name of minors the photographs of guardians (not the photo of minor) is required to be submitted. Photocopies of driving license/passport containing photographs cannot be substituted in place of photographs. Accounts opened by other banks, Local Authorities and Government Departments (excluding public sector undertakings or quasi-Government bodies) are exempted from the requirement of photographs. The banks do not insist on photographs, only in case of accounts of their staff members (Single/Joint).

Related article: (1) KYC for opening accounts of propritory concerns: Relaxation in the requirement of documents.  (2) KYC norms-Additional Documents for limited purpose of ‘Proof of Address’