SEBI notification now allows paperless investor onboarding

SEBI notification now allows paperless investor onboarding

SEBI notification now allows paperless investor onboarding

In a circular released on April 24 2020, SEBI has permitted the KYC process for individual investors to be completed online. The circular allows investors to begin an account-based relationship with a Registered Intermediary (RI) via online KYC, video-based in-Person Verification, and online submission of documents under eSign

But what does this mean for you? Here we’ll unpack the contents of the circular and what it means for both investors and RI’s.

Everything you need to know about SEBI’s circular on online KYC

SEBI, in a recent circular, has envisaged a completely online process for RI’s to onboard investors. This process can either be completed via the online submission of KYC information or through an in-person verification process that takes place through video. 

We will illustrate the steps involved in both processes.

Online KYC Process

 Firstly, the steps to be undertaken for onboarding through the submission of documents online are outlined below: 

  1. The investor visits the online platform of the RI and fills up the online KYC form. 
  2. The name, photograph, address, mobile number, email ID, and bank details of the investor are captured online, and the requisite documents are also submitted online. 
  3. The investor now provides either a photo or a scanned copy of his or her PAN, signed and canceled cheque, or any other Officially Valid Document (OVD) after duly eSigning the same. Here, OVD refers to – 
    • Passport,
    • Driving license,
    • Proof of possession of Aadhaar number,
    • Voter’s Identity Card issued by Election Commission of India,
    • Job card issued by NREGA duly signed by an officer of the State, and
    • Government or the letter issued by the National Population Register containing the details of name, address, or any other document as notified by the Central Government in consultation with the Regulator.
  1. Once the investor fills up the online KYC form, the process can be completed by either – 
    • Taking a print-out of the KYC form, physically signing it, and sending a scanned copy or photo of the form to the RI after duly eSigning the form, or
    • Affixing a cropped signature online on the filled KYC form and submitting it to the RI after duly eSigning it.

The circular also lays down regulations on how the RI’s must verify the documents and details provided by the investor –

  1. Mobile number and email ID are to be verified through a One-Time Password (OTP) mechanism, and the mobile number submitted should preferably be seeded with the individual’s Aadhaar.
  2. PAN is to be verified using the Income Tax Database.
  3. Bank details are to be verified using the Penny-Drop mechanism (for those unfamiliar with this, it’s when a nominal amount such as Rs. 1 is deducted from your bank account).
  4. Aadhaar is to be verified either through eKYC, which is the online authentication of Aadhaar through UIDAI’s database, or offline through QR code or Aadhaar XML. It must be noted here that SEBI allows only a handful of entities to perform online authentication using Aadhaar:
    • Bombay Stock Exchange Limited
    • National Securities Depository Limited
    • Central Depository Services (India) Limited
    • CDSL Ventures Limited
    • NSDL Database Management Limited
    • NSE Data and Analytics Limited
    • CAMS Investor Services Private Limited
    • Computer Age Management Services Private Limited
    • Link Intime India Pvt. Ltd.

This means that all other entities must use offline Aadhaar to verify the KYC information of investors. Additionally, SEBI requires all non-Aadhaar OVDs to be submitted through DigiLocker

Video In-Person Verification Process 

SEBI’s notification outlines a second process that allows investors to submit KYC information online via video, called Video In-Person Verification (VIPV). This is meant to ease the undertaking of the In-Person Verification (IPV) process for intermediaries. 

SEBI has stated that RIs can use their own Applications to undertake online KYC, provided that these platforms have the facilities to capture photos, scan documents, accept documents via DigiLocker, capture video, geo-tag customers, and can only be used by authorized persons of the RI. 

The VIPV process outlined by SEBI is as follows. 

  1. An authorized official of the RI begins VIPV of the investor after obtaining consent. 
  2. The process must take place in a live environment, and the investor must be clear and recognizable. 
  3. The process must include random questions and responses to ensure the liveliness of the video.
  4. The investor must display their OVD, KYC form, and signature. However, this can also be confirmed via OTP.
  5. The official must ensure that the photo of the customer downloaded through Aadhaar verification matches with the investor in the video. 
  6.  Once the interaction is concluded, it must be saved in a secure manner along with the date and time stamps. 

It’s important to note here that SEBI does not require VIPV for an investor either if their KYC verification is completed via Aadhaar-based KYC or when the KYC form has been submitted online and the required documents have been provided via DigiLocker or other verifiable sources. 

This indicates that there are now three paths for an RI to onboard investors online: 

  1. Via Aadhaar authentication through UIDAI (eKYC)
  2. Via Offline Aadhaar (QR Code or XML)
  3. Via VIPV  

Paperless Onboarding through SignDesk

Similar to financial institutions and online onboarding, this notification is set to impart huge financial benefits for RI’s. Paperless onboarding comes with a slew of advantages and is set to have a huge impact on the securities market.  

SignDesk has been helping banks and NBFCs onboard customers via video and cutting their onboarding costs by 90% with our ML-enabled digital onboarding product,

Now, after adding new and improved features to our product, we’re set to do the same for SEBI-registered intermediaries and other entities as well. 

Our video onboarding product is tried and tested and has been proven to get results by making onboarding smooth, convenient, and cost-effective. 

See for yourself by booking a demo now!

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