Banks Notes

What is KYC (Know Your Customer) in Banking?

— December 9, 2021 add comment
What is KYC

What is KYC?

Know Your Customer (KYC) is a form issued by Nepal Rastra Bank (NRB) for banks and financial institutions for maintaining the record of the individual customers. KYC is a unified directive of Nepal Rastra Bank that every bank must follow. KYC helps BFIs to collect the following records of the customers.

  1. Name of the customers
  2. Economic Status of the customers
  3. Literacy level of customers
  4. Residence of customers

Importance of KYC

Importance of KYC or Objective of KYC or Benefits of KCF these all are the same things which can be listed as below.

  1. To gather information of customers details
  2. To gather information of business of customers
  3. To control money laundering and terrorist financing
  4. To compliance rules and regulation
  5. To minimize the operational risk
  6. To make a secure business transaction
  7. To protect the right of customers
  8. To assess the customer for new product launch
  9. KYC acts as a pool to earn profit in the business.
  10. To minimize the risk related to the banking system

When is KCY Needed?

KCY form should be filled up by the customers in the following situations. KYC is needed for every person who is doing financial transactions. The concept of KYC is applicable not only in banks and financial institutions but also to every fintech company.

  1. At the time of account opening
  2. At the time of making the deposit
  3. At the time of loan advancement
  4. At the time of remitting fund
  5. At the time of making foreign exchange transactions
  6. At the time of doing funded and non funded business
  7. At the time of changing signature
  8. At the time of activating the account
  9. At the time of changing nominees

What are the sources of KCY?

KCY source means what are the sources of gathering the information of customers. Following are the sources of KYC.

  1. Customer itself
  2. Family members
  3. Colleagues and friends
  4. Government offices such as the office of the registrar, Tax office
  5. Social networking profiles
  6. Social bookmarking sites
  7. Business listing sites
  8. Magazines, Papers
  9. Neighbors etc.

Information Related to Natural Person for KYC

  1. Name and address (Temporary, Permanent)
  2. Occupation, office address, Permanent Account Number (PAN)
  3. Contact, email address
  4. Details of the house owner if customers have rented room
  5. Name of the parents and grandparents
  6. Location of the address
  7. Source of income, Approx. income amount, approx. annual transaction etc.

Information Related to Legal Person for KYC

Here legal person means an organization. Following is the information related to the organization in KYC.

  1. Name of the organization
  2. Address of the organization
  3. Permanent Account Number (PAN), Value Added Tax (VAT)
  4. Date of registration, address of the registrant’s office
  5. Objectives, branches, and location
  6. AOA and MOA
  7. License number, valid date of the license, and name of the issuing office
  8. Approx. annual income, approx. annual transaction
  9. Minute of the A/C opening agenda
  10. Details of the power of attorney
  11. Paid-up capital and authorized capital

Other Posts

Possible Questions

Q. Why KYC is important for banks and financial institutions?
Q. Why Bank and Financial Institutions must prepare KYC? What is the major information individual or institutions should provide?
Q. List down and explain the positive and negative impacts of the KYC in business?

 

Comments Box