One fine day, Bengaluru-based M Ramachandran (name changed), a senior citizen who retired as an official from Reserve Bank of India (RBI), found his account in State Bank of India (SBI) frozen for want of renewal of his know-your-customer (re-KYC). After visiting SBI three times, he was finally told to submit a copy of his permanent account number (PAN). He told the banker that SBI already has his PAN details and has been deducting tax deducted at source (TDS) on the interest he earned. However, the banker simply told him, 'It is a rule (to seek PAN details)'. Even after re-submitting his PAN details, Mr Ramchandran's account remains frozen and he has no idea if and when it will be unfrozen.
Vinod Sharma (name changed) from Mumbai, a businessman, has employed one person just to do the KYC for banks and other compliances from several government agencies. He says, "I have (employed) a person just to do various KYCs of banks as the banks want to do KYC every two years. Besides, KYCs by banks, compliances for registrar of companies (ROC), income tax (I-T), goods and services tax (GST), directorate general of foreign trade (DGFT), BrihanMumbai Municipal Corporation (BMC) and customs all add up to an entrepreneur wasting 30%-40% of his time in all such unproductive activities. Our policymakers just do not realise how much this is costing the country."
These are just two examples of millions of bank customers who are expected to do re-KYC but are ending up doing fresh KYC due to a lack of clear guidelines from RBI and banks' focus on collecting additional and useful information (for marketing third-party products-TPPs).
As per RBI norms, banks must adopt a risk-based approach for periodic updation of KYC. For high-risk customers, banks can update KYC at least once every two years. For medium-risk customers, updating KYC should be done once every eight years; for low-risk customers, updating KYC needs to be done once every 10 years from the date of opening the account or the date of the last KYC update.
Here is what
RBI's Master Direction - KYC Direction, 2016, updated as of 6 November 2024 says for re-KYC for individual customers.
"No change in KYC information: In case of no change in the KYC information, a self-declaration from the customer in this regard shall be obtained through the customer's email ID registered with the regulated entity (RE), customer's mobile number registered with the RE, ATMs, digital channels (such as online banking/internet banking, mobile application of RE), letter etc."
However, RBI has neither provided any specific format nor specified exactly what KYC information banks can seek from existing customers. As one of Moneylife's readers has pointed out, it appears that RBI just wants banks to collect the basic data (with supporting documents) to establish the customer's identity and contact details during re-KYC. "For KYC, RBI requires the customer to submit identity proof, address proof, photograph and if available, mobile number and email ID, and nothing more."
Further, the reader highlights Chapter X, Para 55 of the circular regarding customer information being collected. Instructions under point (b) say, "Information collected from customers for the purpose of opening of account shall be treated as confidential and details thereof shall not be divulged for the purpose of cross-selling, or for any other purpose without the express permission of the customer."
"Thus, collecting any extra data in the garb of KYC information is illegal. However, that is exactly what all the banks have been doing, and the RBI, as usual, is not aware of the deceitful tricks the banks have played on customers," the reader says.
Moneylife randomly checked the websites of some banks to know about their re-KYC procedures. We found only Bank of Maharastra has a separate self-declaration form that customers can fill out to confirm no changes to their KYC details since the last update. Kotak Mahindra Bank, Bank of Baroda and HDFC Bank provide an option to tick mark in case of re-KYC in the form; however, instead of photo ID and address proof, they seek additional details like occupation and income from customers.
SBI, ICICI Bank, Axis Bank, IDFC First Bank and NKGSB Co-operative Bank, which Moneylife checked, seek entire KYC details from existing customers in the name of re-KYC. Punjab National Bank seeks basic customer details, including annual income, expected annual credit and specimen signature or thumb impression as part of the KYC update.
Only a few banks offer the option to submit such a self-declaration online (net banking or mobile banking), with most requiring that the re-KYC be completed by a visit to the branch.
There is an extra option for Bank of Baroda and Bank of Maharashtra: you can complete the process via a video call with a bank official. ICICI Bank and Axis Bank offer re-KYC through SMS. However, ICICI Bank's re-KYC is actually eKYC with Aadhaar and asks for more permission to link and access Aadhaar data. Axis Bank says if there is no change in KYC information, the customer can send an SMS with 'REKYC N' to 56161600 from the mobile number registered with the bank. However, we could not verify it.
It also means that even if there are no changes in the customer's KYC information, she needs to undergo the whole process again by submitting all documents and providing all information demanded by the bank/s.
According to consumer activist and former banker Abhay Datar, KYC documents submitted by customers in paper format may have become untraceable, which is making banks seek all KYC information afresh. "For re-KYC in a public sector bank (PSB), I submitted a written letter accompanied by self-attested photo ID and address proof, and the PSB accepted it. However, for re-KYC, there is no format specified by either RBI or any bank in case there is no change in customer information. As you correctly observed, most banks provide only KYC forms even for re-KYC."
Banks are mandated by RBI to keep their records up-to-date and relevant by undertaking periodic reviews and updations. "A fresh KYC process or documentation may have to be undertaken in certain cases, including where the KYC documents available in bank records do not conform to the present list of the officially valid documents (OVDs) like passport, driving license, proof of possession of Aadhaar number, the voter's identity card, job card issued by NREGA and letter issued by the National Population Register, or where the validity of the KYC document submitted earlier may have expired," the regulator says. (
Read: Bank KYC: RBI Says Customers Can Submit Self-declaration Online if There Is No Change)
From existing bank customers' point of view, re-KYC must be quite simple and easy, as stated by RBI's master directions without the bank collecting additional customer data. Hope the regulator is listening and will issue specific directions to ease the pains of re-KYC for bank customers.
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Recently a ATM cash withdrawal scam of several lakhs came out in some ATMs of theSBI. Where they effectively used the loophole in the system. what they used to do is withdraw cash from ATM but leave some notes in the cash slot so it will go into undelivered cash and entire transaction is cancelled and the entire amount is not debited to the bank account. They were using cloned as well as stolen cards as per the report. And they were doing it for almost a year. It could have been ditected immedietly if they regularly tally the cash in ATM. It was blamed on time out error. That is a safety mechanism introduced in ATM that if you did not take out the cash from the dispensing slot within a time limit it will go back into ATM machine as failed transactions.
And I came across and reported a similar time out error mechanism in 2003. When Corporation Bank introduced first time in country, mobile recharging facility through ATM. At that time data connectivity was always a issue. So your mobile was recharged but the amount was being recredited back due to same time out error. I brought this to the notice of the authorities who did not bother to look into it for many days. And I saw it being happening in many ac ounts. We had a group email facilities So to caution all branches I sent a mail of the incident through this facility. And It was one of the charges when desciplinary action was initiated against me when I refused to compromise SWIFT security under the working conditions they created in the branch, applied and went on a long leave giving same as reason, ( similar compromise facilitated Nirav Modi scam in PNB) of misusing the email. But it was being used by many including executives to convey good morning and other greetings. Surprisingly even Telecom companies did not bother to take up the issue. When I brought this to the notice to RBI they also did not take it seriously. Then I had to write a nasty letter when they took up the verification and were given the same technical excuse of time out error and happy to accept it. But this facility was withdrawn after some time. Its repeat now proves they have not addressed this till now.
please do better research!
Conman - Multiple Aadhar cards, PANs, Passports delivered home KYC cleared
I have bitter experience how more than 50 sms e-mails received aimlessly blocking bank account rather freezing where customers wasted valuable times there except KYC documents already with them no change' but instead of introspection banks have means to earn by engaging online too forgetting how valuable times customers have lost
Even banking ombudsman is passive to such issues
RBI must intervene to compensate such customers
One bank asked customer to deposit 750 fir kyc charges
Hell in banking system
Can it be more ridiculous than this in this modern time.
Who has permitted them to do this?
And they want re-kyc by each joint holder. I have 6 bank accounts, all with other 6 members. So, they want 12 re-KYC with PAN, Aadhaar, Photo and other details. They expect my mother who is 85 Year Plus to visit their branch to do it.
Why can't govt set up a re-KYC authority meant to be used by all financial and government institutions?
Actually in effect by re-KYC they are asking for proof that the account holder is alive. This is because PAN and Aadhaar don't change unless address has changed. This authority can easily setup a single KYC for one person by online video capture where person shows his PAN and Aadhaar. This will save lots of money, and resources.
2. I and my wife maintain a Joint SB Account at one of the SBI Branch.
3. We made online Fixed Deposit using Internet Banking by debiting the above mentioned SB Account.
4 As online overdraft using internet Banking was not allowed by the system on the ground that the FD is joint, we approached Branch for overdraft against the online FD. The concerned officer at the Branch required fresh Aadhar and PAN of mine and my wife in case Overdraft facility against online FD is allowed by the Branch.
5. When I said that the saving account to which online FD is linked is already KYC complied and online FDs have been created by debit of the SB Account, the officer said fresh Aadhar and PAN is must. I also told him that there is no change in PAN and Aadhaar, but the officer insisted for fresh Aadhar and PAN.
6. Surprisingly, when I made complaint to Corporate Centre of SBI, they replied as quoted below :-
"Thank you for contacting us. Dear sir, as per branch confirmation, KYC documents has been requested for the purpose of OD/Loan Account file, as one of the mandatory documents. We regret for the inconvenience and assure our best services.“
This has been underlined forcefully in SC's final ruling on Aadhaar in 2018 and the only case where Aadhaar is mandatory is for linking it with your PAN.
There are 12 other documents clearly specified, especially in the case of individuals not taking any government largesse, which are sufficient to establish identity, address proof and date of birth.
Just yesterday, no less an authority than the EC, has clearly announced in all the newspapers that, for the purpose of casting your vote, including persons availing government benefits, any of these 12 documents are more than adequate.
Indeed Moneylife would be doing yeoman service for consumers, if they can prevent this illegal arm-twisting by various institutions (both public and private) in the shortest time.
What I meant to imply, if it was not glaringly evident, is for Moneylife to take pro-active steps to have the issue resolved once and for all and give tremendous relief to scores of consumers.
I hope you are up to doing so.
In case you do, thanks.