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In the 28th meeting of Financial Stability and Development Council (FSDC) held recently in New Delhi chaired by Union Finance Minister Nirmala Sitharaman, the FSDC has decided to prescribe norms for uniform KYC.
Madhabi Puri Buch, Chairperson, SEBI, Debasish Panda, Chairperson, IRDAI and Dr. Deepak Mohanty, Chairperson, PFRDA also attended this meeting.
The government will also explore introduction of inter-usabilty of KYC records across the financial sectors. This means that bank KYC will be enough to invest in financial product like mutual funds and insurance.
In addition, FSDC will formulate a strategy to simplify the exiting KYC norms and introduce complete digitalization of KYC process.
Currently, a separate KYC is needed for different financial products. For instance, separate KYCs are required for opening a bank account and investing in mutual funds.
Distributors feel that the existing complications in KYC norms are, to some extent, proving to be deterrent for new investors to invest in mutual funds. This KYC hindrance is a major cause of concern for the MF industry.
If this goes through, it would simplify customer onboarding by reducing the turnaround time to acquire a new client.
While the government launched central KYC (CKYC) registry agency in 2016 to eliminate the need to do fresh KYC for investing across financial assets, the scope of central KYC is limited to the capital markets only. Even after eight years, banks and insurers are yet to share KYC details on CKYC platform.
