Opening a bank account to be a lot easier

MUMBAI: The Reserve Bank of India (RBI) has diluted some of its know your customer (KYC) norms, which made opening bank accounts difficult for the poor. The central bank has taken cognisance of the fact that many Indians are unable to open bank accounts because they do not possess sufficient documents to provide proof of address.

RBI has expressed concerns over people not getting an access to banking services due to stringent KYC norms followed by banks. For this purpose, the central bank has clarified that banks can verify the address provided by the customer by asking the latter to furnish a recent utility bill or other related documents. In addition, RBI has told banks not to reject customer applications if the documents provided by customers are in the names of their immediate relatives. Banks have been told to get a declaration from the relatives concerned, stating that the applicant is staying with him/her.

RBI has suggested that banks could use supplementary evidences such as a letter received through post for further verification of the address. The central bank has said that low-risk customers should not be bear the brunt of stringent KYC norms and banks need to keep this in mind when they issue operational instructions to their branches.

In a bid to ensure that banks verify customer credentials regularly, RBI has told banks to review the risk profiles of their customers, at least, once in six months. Banks have been asked to upgrade the identification data, at least, once in five years for low-risk customers and once in two years for the medium and high risk categories.

Considering that many Indian banks now have a substantial presence in offshore markets, the central bank has said that all these guidelines for KYC norms and anti-money laundering will be applicable to branches and subsidiaries of Indian banks in other countries too, especially if they are located in countries which do not follow recommendations of the Financial Action Task Force.

RBI has also voiced concerns on transactions, conducted for financing terrorist activities. In this context, RBI has told banks to monitor accounts, which are suspected of having links with terrorists and subsequently, report any anomalies detected to the Financial Intelligence Unit India. Also, prior to opening accounts, banks have been told to verify that the name of the prospective customer does not appear in the list of blacklisted individuals, compiled by the United Nations Security Council.