WHAT IS CKYC?
As per Ministry of Finance (MOF), CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest of India) is supposed to perform the record keeping as of CKYCR (Central KYC Records Registry). The body will be responsible to receive, hold, safeguard and when required retrieve the KYC records of customers in digital form. This is a revolutionary idea as far as centralizing information is concerned. Initially, where agencies like CAMS and Karvy used to maintain such information about individual clients separately for each financial platform, CKYC will store all such client information, commonly accessible at all financial institutions.
OBJECTIVE OF CKYC
The main objective of this programme is to provide a platform which enables clients to fill in their credentials once in order to interact with various FIs (Financial Institutions) nation-wide. With this paradigm-shift in record-keeping, the most important factor that comes handy is removal to the duplicity of data which saves both time and cost. A 14-digit number KIN (KYC Identification Number) is provided and when you complete your registration for CKYC this number needs to be provided by you while doing any financial transactions.
- Centralized data
- Time and cost saving
- Improved turn-around time
- More secure as information is stored digitally
- Reduction in redundancy and duplicity
- Requires a lot of time and effort initially
- Still in the implementation phase
- Not yet synced with all FIs
- KYC documents still need to be submitted in paper format initially. Paperless onboarding is still unrealized.
- Cap on investment- Rs. 50,000 per year per fund house.
HOW DO I DO IT?
Since it is still in the implementation phase, the digital on-boarding is yet to be done. for now, to register for CKYC, the CKYC form is to be filled on paper along with other required documents and need to be attested and verified physically. Also, an in-person verification needs to be done to authenticate the documents produced.
This process can be conducted through a mutual fund distributor or you may visit a mutual fund office or registrar whichever is convenient.
In the case of NRI investors, a person can self-attest and verify the documents and mention the same in KYC form.
WHAT DOES IT MEAN TO THE INVESTORS?
CKYC collects and transfers verified information to specific Financial Institutions which you have chosen. This information consists of the your KIN and other related documents for conducting transactions.
These FIs may be banks, AMCs, FIs etc.
- FOR NEW INVESTOR
A new investor has to fill the CKYC form, duly attested, along with required supporting documents and submit it for all future financial transactions. This will provide ease of use as the investor will not have to do the submissions repeatedly if he wishes to make multiple investments at different platforms and institutions.
- FOR EXISTING INVESTOR
As of now, a KYC complaint existing customer need not do anything and can continue investing in mutual funds like before. But soon there may be a change coming as far as existing customers are concerned in order to centralize the data fully.
LIST OF DOCUMENTS REQUIRED
Following documents are required in order to get oneself registered for CKYC
- Duly filled CKYC form
- Address proof- It includes passport, Aadhar card, Driving license etc
- ID proof- It includes passport, Aadhar card, voter card, driving license etc
- PAN card
DIFFERENTIATING BETWEEN KYC, eKYC, and CKYC
It is important to understand all three are versions of a process which needs authenticating customer identification.
KYC- stands for know your customer
An IPV (in-person verification) is carried out in order to verify the details provided by the individual. Once the verification is done, the information is uploaded to the KRA database.
eKYC- stands for electronic know your customer
In this, the Aadhar number of the investor is linked with the account. The authentication can be done in two ways, either by biometrics or OTP (one-time password).
The verified data is uploaded to the KRA database
CKYC- stands for Central Know your customer
Here, the investor is allowed to fill in the details only once in order to carry out multiple transactions across different institutions. It removes the need for multiple details filing. It is conducted by CERSAI.
- DATA RETRIEVAL
The registered institutions can look for and at the same time download investor information from the CKYC database by punching in desired credentials. This retrieval can be done in bulk or a single file as well.
- DATA UPDATION
If there happens to be an update in the data, all the linked institutions receive notification electronically for the updated record.
- REDUNDANCY CHECKER
The data uploaded on the CKYCR will be checked for redundancies and duplication on the basis of ID and demographics; if found, will be provided with similar cases for resolution.
- CHARGES FOR DATA HANDLING
CKYC charges FIs to access the data. The rates applicable are as follows
- CREATING RECORD- RS. 0.80
- DOWNLOADING RECORD- RS. 1.10
- UPDATING RECORD- RS 1.15
- MOBILE REGISTRATION
The KIN will not be provided at first hand. It is a time taking process, the alloted KIN will be intimated once the registration is complete over the registered mobile number.
- BUSINESS IMPACT
CKYC has a huge business impact as far as both the entities are concerned, the FIs and the user. It is time-saving as well as cost saving for both. Also since the data would be centralized and formalities need to be done only once, the institutions can focus on the main agenda of conducting business smoothly.
CHALLENGES WITH CKYC
Apart from being a new thing in the financial demographic, a lot of challenges stand ahead of fully incorporating CKYC in the system.
- CENTRALIZATION NATION-WIDE
It may sound simple, but centralizing data across an organization takes a lot of effort and time, CKYC is happening on an exponentially larger scale. MOF wants the investor data to be stored at a single platform which includes NRIs as well. This means a lot of people with a lot of data associated.
- MEETING THE DEADLINE
March 2017 was the original deadline for banks to upload the data which has already been passed. The practical difficulties were realized once the project went on air. A lot of time would be required to gather, segregate and upload the data.
- MAINTENANCE OF LEGAL ENTITY ACCOUNTS
This is supposedly the biggest challenge all FIs are going to face as in such case there is a frequent change in the authorized signatories. A lot of NOCs (no objection certificates) would be required to perform such action in case the client has opted for any facilities with multiple banks.
- CHANGE IN CLIENT DEMOGRAPHICS
As far as banks are concerned, they are going to have the toughest time. Since the clientele is dynamic, the data updating will be required to be done frequently. The banks would need to stay updated with the client’s demographics certainly.
The worst part is, if such update is not made on an immediate basis, the other banks may open a new account on the last CKYC records which will result in ambiguity and legal discrepancies shaking the foundation of data preservation at banks especially.