Sucheta Dalal :KYC hassles put customers in a tangle
Sucheta Dalal

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KYC hassles put customers in a tangle  

April 29, 2010

 If you are an investor in a mutual fund or a credit card customer of a bank, chances are you have already been contacted by the company concerned to furnish a bunch of documents as proof of your identity. It does not matter if you have already submitted the documents to your broker or agent. This annoying facet is an inevitable outcome of the Know Your Customer (KYC) regime brought upon bankers, mutual fund companies and telecom operators.

Repetitive documentation and filing has ticked off hundreds of investors. An annoyed investor told Moneylife, “Recently, various asset management companies (AMCs) and banks have started asking me to furnish details of KYC certification along with documentary evidence. This was despite obtaining my certification from Central Depository Services Ltd (CDSL) two years back. When I requested them to obtain the same from CDSL directly in order to avoid unnecessary paperwork and duplicated effort to verify/re-verify the KYC particulars, they seemed a bit upset.”

Another investor had a similar experience. He said, “When I open an account with a broker, I submit all the details as required under KYC. In fact, the broker's representative has personally collected all the details after meeting me. So, when you are again asked to submit the same set of documents, it is enough to annoy you. My simple request to SEBI is, when investors have opened trading accounts with large brokerages and after satisfying all the KYC conditions, they should not be made to go through with this procedure again.”

Sources from the Reserve Bank of India (RBI) said that customers should comply with the requirements as it would benefit them in terms of safety, security and seamless flow of transactions. With SEBI piling the pressure on banks and AMCs to furnish KYC documentation of customers, these companies have been forced to round up customers for filing necessary documents.

A credit card customer of SBI recently received a letter from the bank seeking various documents under the KYC norms, despite the fact that all his details are already with the company. The letter stated that as per RBI guidelines issued on KYC norms, it is mandatory to periodically update the records with current information on the customers.


The basic purpose of KYC was to prevent identity theft, money laundering, terrorist financing, etc. This involves verifying customers' identity and address by asking them to submit documents that are accepted as relevant proof.

However, in most cases, KYC has only served to complicate procedures; requiring huge paperwork on part of service providers and making customers run from pillar to post for filing necessary or sometime irrelevant documents. To put things in perspective, an investor is required to sign around 80 times on a KYC form. The sheer volume of documentation necessitated acts as a huge deterrent for many investors.

An independent financial advisor (IFA) had earlier disclosed to Moneylife, “I have a customer who wants to invest Rs50,000 each in five different funds. For this, I have to give five different KYC documents for him and his wife, which is absurd. The issue here is, if you know the person’s surname and father’s name, date of birth and PAN card, there can only be one person whose details match. So why is the need for this unnecessary repetitive work?”— Sanket Dhanorkar

-- Sucheta Dalal