Agenda

New Regulations by RBI on ▪ - Recent Amendments to the KYC Master circular

KYC: ▪ - Types of KYC
Impact on Neo Banks and Banks ▪ - Video KYC Explained
▪ - New RBI Norms on KYC and its impact

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 KYC and Video KYC

The Reserve Bank of India has made it mandatory for banks, financial institutions and
other organizations to verify identity and address of all customers who carry out
financial transactions with them

Types of KYC

Manual KYC Video KYC E-KYC

As per RBI KYC Master direction, 2016

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 KYC and Video KYC

Amendments to Master Direction on KYC

Amendment to Master Direction on

KYC to include OTP based e-KYC for
account opening with limits Only banks allowed to use online Extension of V-CIP
▪ Account opening – Rs 1,00,00 Aadhaar Authentication; Other option for non-
▪ Loan accounts – Rs 60,000 REs to do offline verification Individual customers

Feb Dec Sept May Jan May

2016 2016 2018 2019 2020 2021

RBI KYC Direction, 2016 framed Use of Aadhaar Authentication
under Section 35A of Banking by Private Entities was brought
regulations Act, 1949 down by the Supreme court of
India - Justice K.S.Puttuswamy
Retd. v/s Union of India
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Introduction of VCIP and
Digital KYC (Aug 2019) for
authentication of the customer
and e-documents
13
 KYC and Video KYC

▪ In person verification / Digital KYC

▪ OTP based Video IPV
IPV ▪ Video KYC

▪ Any official document that carries

the photo of the customer, name, ▪ Original verified PAN
▪ NSDL PAN Verification
▪
▪
and DOB
POA can act as POI
Documents -
POI PAN ▪ Direct integration - NSDL API
▪ Third-party service provider
▪ Passport Components of KYC ▪ DigiLocker – map PAN to DigiLocker
▪ Aadhaar – proof of possession & documentation
▪ Voter ID
▪ MNREGA
▪ Driving license
▪ Registration certificate
▪ Certificate/license issued by the municipal
authorities
▪ 36CST/VAT/ GST certificate
▪ Govt. documents containing Address ▪ Certificate/registration document issued by Sales
▪
▪
Aadhaar verification – online / offline
Via third party service provider – Aadhaar,
passport, utility bills* etc
POA Other ▪
▪
Tax/Service Tax/Professional Tax authorities.
IEC (Importer Exporter Code
Complete Income Tax Return
▪ DigiLocker – currently supports Aadhaar and ▪ Utility bills such as electricity, water, landline
DL telephone bills, etc.
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 KYC and Video KYC

*With respect to proof of address

IPV
Only where the Officially Valid Documents (OVD) furnished by the
customer does not have updated address, the following documents or the

POI PAN equivalent e-documents thereof shall be deemed to be OVDs for the
limited purpose of proof of address
❑ utility bill which is not more than two months old of any service
provider
❑ property or Municipal tax receipt
❑ Pension orders
POA* Other The customer shall submit OVD with current address within a period of
three months of submitting the above documents specified

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 KYC and Video KYC

APIs in the industry for documentation and KYC

PAN Validation Telephone Bill Image verification

Voter ID Electricity Bill

Passport

E-mail Gas Bill / LPG connection Vehicle RC

Bank account (penny drop) Driver’s License Aadhaar verification

Mobile Number Authentication GSTN Verification Water Bill

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 Digital Lending KYC and Video KYC

Aadhaar based KYC – on complete voluntary basis by the customer

▪ Non face to face mode

▪ Can only be used for term loans product (credit card KYC can’t be OTP based)
Online e-KYC
(OTP Based) ▪ aggregate amount of yearly loans sanctioned shall not exceed Rs 60,000
▪ Shall not be allowed for more than one year
▪ Only banks can use this method

Aadhaar KYC

▪ REs other than banks can carry out offline

Offline e-KYC ▪ XML, PDF or QR Code format

(XML Verification) ▪ Aadhaar number not revealed (ref ID shared); no biometrics
▪ Encrypted data and digitally signed by UIADI
▪ Cannot be older than 3 days for validation purposes

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 Digital Lending KYC and Video KYC

Video KYC

RBI in Jan,2020 amended the KYC norms allowing banks and other lending institutions
regulated by it to use Video based Customer Identification Process (V-CIP)

The steps in V-CIP involves

❑ Customers get on a live video call with an agent
❑ The system extracts data from the Government-issued
ID card
❑ Then authenticates photo on the ID with AI face match.

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 V-CIP

Customers fills application RE’s officer initiates V-KYC PAN OCR Verification Aadhaar offline XML or OTP Geo-location Tagging
and requests for KYC process on request. The based e-KYC verification
process must initiate of
domain of the RE

Liveness check / face match Screenshot capture and Random Questionnaire RE’s officer connected to the
KYC completeness
between screenshot and ID detail verification by by the RE officer / agent customer. Consent to record and
and report share
proof system and agent collect data is explicitly taken

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 V-CIP

Infrastructure

• RE should have complied with the RBI guidelines on minimum baseline cyber security and resilience framework for banks
• The technology infrastructure should be housed in own premises of the RE and the V-CIP connection and interaction shall
necessarily originate from its own secured network domain.
• RE shall ensure end-to-end encryption of data between customer device and the hosting point of the V-CIP application.
• V-CIP infrastructure / application should be capable of preventing connection from IP addresses outside India or from
spoofed IP addresses.
• Application shall have components with face liveness / spoof detection as well as face matching technology with high degree
of accuracy
• The ultimate responsibility of any customer identification rests with the RE.
• Based on experience of detected / attempted / ‘near-miss’ cases of forged identity, the technology infrastructure including
application software as well as work flows shall be regularly upgraded
• V-CIP infrastructure shall undergo necessary tests such as Vulnerability Assessment, Penetration testing and a Security Audit
to ensure its robustness and end-to-end encryption capabilities.

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 V-CIP

V-CIP Records and Data Management

• The entire data and recordings of V-CIP shall be stored in a system / systems located in India.

• REs shall ensure that the video recording is stored in a safe and secure manner and bears the date and time stamp that
affords easy historical data search

• The activity log along with the credentials of the official performing the V-CIP shall be preserved.

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 New Norms Proposed By RBI
And their Impact

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 V-CIP

Extension of VCIP for new categories of customers such as proprietorship firms, authorized signatories and beneficial owners of Legal Entities
and for periodic updation of KYC

Eligibility Documentation Required

• PAN Card or Form No. 60
Individual Customers • Aadhaar Number

Any 2 of

• Registration certificate
Proprietorship Firm • Certificate/license issued by the municipal authorities

• 36CST/VAT/ GST certificate

• Tax Registration Certificate

Authorized signatories and • IEC (Importer Exporter Code

Beneficial Owners of Legal Entity
• Complete Income Tax Return
(LE) customers
• Utility bills

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 V-CIP

Extension of VCIP for new categories of customers such as proprietorship firms, authorized signatories and beneficial owners of Legal Entities**
and for periodic updation of KYC

Impact

Current Account Opening as well as MSME Lending will go completely digital.

Digital SME Banks would be launched by Banks as well as Neo Banks in the next
6 months.

As there is no restriction on amounts, the valuation of Neobanks would go through

the roof.

KYC updation will now be cheaper and faster.

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** Need further clarification on the process
 V-CIP

▪ KYC records downloaded from CKYCR

▪ Equivalent e-document of Officially Valid
Documents (OVDs) including documents
issued through DigiLocker

Customers fills application RE’s officer initiates V-KYC PAN OCR Verification Aadhaar offline XML or OTP Geo-location Tagging
and requests for KYC process on request. The based e-KYC verification
process must initiate of
domain of the RE

Liveness check / face match Screenshot capture and Random Questionnaire RE’s officer connected to the
KYC completeness
between screenshot and ID detail verification by by the RE officer / agent customer. Consent to record and
and report share
proof system and agent collect data is explicitly taken

If current address of the customer is different from permanent

Negative list should be factored in at appropriate stage of work flow address, record of current address to also be captured as per existing
to check relation to cases rejected earlier requirements ( via declaration or OVD)
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 Updation of KYC Details

Introduction of more customer-friendly options, including the use of digital channels for the purpose of periodic updation of KYC
details of customers.

This would mean that customer would be able to mobile banking as well as internet banking for updating their KYC.

• Using Mobile Banking / Internet Banking, ATM,

Retail Customer SMS complete OTP based KYC, letter

• Using Mobile Banking / Internet Banking,

MSME Customer • For Proprietors / Authorised Signatories / BO
through V CIP

Note: periodic updation shall be carried out at least once in every two years for high risk customers,
once in every eight years for medium risk customers and once in every ten years for low risk
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customers from the date of opening of the account / last KYC updation.
 Updation of KYC Details

Individual Customers

• No Change in KYC Information

A self-declaration from the customer in this regard shall be obtained through customer’s email-id registered with the RE,
customer’s mobile number registered with the RE, ATMs, digital channels (such as online banking / internet banking, mobile
application of RE), letter etc
• Change in address
o A self-declaration of the new address shall be obtained from viaemail-id registered with the RE, customer’s mobile
number registered with the RE, ATMs, digital channels (such as online banking / internet banking, mobile application of
RE), letter etc.
o the declared address shall be verified through positive confirmation within two months, by means such as address
verification letter, contact point verification, deliverables etc.
o REs, at their option, may obtain a copy of OVD or deemed OVD or the equivalent e-documents thereof.
• Accounts of customers who were minor at the time of opening account on their becoming major:
• Fresh photographs shall be obtained on their becoming a major
• Ensure that the CDD documents are compliant to guidelines
• Wherever required, REs may carry out fresh KYC of such customers

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 Updation of KYC Details

Non-Individual Customers

• No Change in KYC Information

o A self-declaration from the customer in this regard shall be obtained through customer’s email-id registered with the
RE, customer’s mobile number registered with the RE, ATMs, digital channels (such as online banking / internet banking,
mobile application of RE), letter etc
o REs shall ensure during this process that Beneficial Ownership (BO) information available with them is accurate

• Change in KYC Information

o In case of change in KYC information, RE shall undertake the KYC process equivalent to that applicable for on-boarding
a new LE customer

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 Let’s Discuss
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THANK YOU
Sreekant R
sreekant@thedigitalfifth.com

+91 98671 67676

www.thedigitalfifth.com

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