RBI Governor Releases Statement
On May 5, 2021, the governor of the RBI, Shaktikanta Das released a statement looking back on the year 2020.
In his statement, the governor assessed the state of the Indian economy and announced several measures the RBI would take to ensure a full recovery and subsequent growth.
The statement covered a broad set of measures; from instituting a term liquid facility for emergency health services & announcing credit for MSMEs, to creating a resolution framework for COVID-related stressed assets & relaxing the overdraft facility for state governments.
One announcement that will have far-reaching implications for the financial sector is the governor’s statement regarding the rationalisation of compliance to KYC requirements.
The announcement essentially states that certain KYC norms will be updated, to enable digitization and to leverage digital channels for KYC, such as V-CIP.
How Will KYC Norms Change?
In his statement, the governor addressed 4 key components of KYC compliance that will be “rationalised”, i.e, altered to enable improvement.
These changes are being instituted by the RBI in order to enhance customer convenience and encourage remote KYC transactions.
Here are the 4 key components of current KYC norms that will be updated.
- The scope of Video KYC ( V-CIP for banks & NBFCs), will be extended to include new categories of customers such as proprietorship firms, authorised signatories, and beneficial owners of legal entities
- Aadhaar eKYC accounts will be converted to full KYC accounts
- The KYC identifier used by the Centralised KYC Registry (CKYCR) will be available for use in V-CIP & to submit OVDs electronically
- Digital channels such as V-CIP will be introduced for transactions such as periodic KYC updations
What Do These Changes Mean?
While the announcement lays a tenuous framework for updated KYC norms, the implications are not clear cut.
The full implications of the governor’s statement will only be clear once the amended master directions for KYC are publicly released. However, these are the key changes that we can expect to see.
Here’s what you should take away from the governor’s statement regarding KYC norms.
Video KYC will become more widely used
By extending the applicability of Video KYC to not just individuals but firms, signatories & owners of legal entities, the usage of V-CIP to onboard customers will skyrocket. The KYC process for MSMEs in particular, will be completely digitized & streamlined, enabling better access to credit.
This will also lead to further innovations to simplify & expedite the KYC verification process and will allow more people to remotely & securely verify their identities.
Half-KYC accounts will be converted to full-KYC
Accounts opened after a standard eKYC-based verification do not qualify as full accounts. This means that accounts opened following eKYC cannot have a maximum balance exceeding ₹ 1 lakh. Additionally, funds exceeding ₹ 2 lakh cannot be added to the eKYC account.
The governor’s statement appears to imply that these half-KYC accounts will all be converted to full KYC. However, the full scope of this relaxation in KYC compliance is still unclear.
Customers whose KYC update is pending can note that no punitive restrictions will be imposed for non-compliance until December 31, 2021.
Video KYC will become faster & easier to use
By allowing the KYC identifier used by CKYCR to also be used in V-CIP, the Video KYC process will be simplified & expedited.
The KYC identifier of CKYCR is usually a 16-digit KYC Identification Number (KIN). This number is generated once cKYC has been completed & can be used to quickly complete KYC with any regulated FI.
Integrating KIN or other KYC identifiers with Video KYC will speed up the process as the customer’s OVDs & relevant identifying information will already be stored in CKYCR & can be retrieved instantly using KIN. This reduces the number of steps in V-CIP & ensures quick & easy KYC completion.
Video-based KYC transactions will become the norm for FIs
The governor’s statement also mentions how digital channels will be made available for all KYC transactions, and not just account opening.
Video-enabled KYC in particular, is set to become a benchmark for FIs, as V-CIP enables remote & instant transactions with a high level of security.
With all these changes on the horizon, Video KYC is firmly on the path to revolutionizing KYC compliance via AI-powered automation & complete digitization.
Apart from the various advantages afforded by these rationalizations of compliance, businesses can experience several additional benefits simply by employing a video-enabled KYC verification system.
The governor’s statement serves as a further impetus for businesses to adopt Video KYC on a large scale, but why should businesses utilize Video KYC?
Why Video KYC?
Here’s why Video KYC has produced amazing results and real benefits for FIs.
Massive reductions in onboarding & KYC expenses
Several reports estimate that automating KYC procedures can entail a minimum of 50% reduction in expenses.
Video KYC in particular, has been shown to reduce onboarding costs by 90%, due to the digital nature of the process, the absence of paperwork & the utilization of automated verification methods.
Shortened turnaround times
The total duration of a KYC verification process that isn’t digitized can stretch from 10 to 20 days.
Video KYC demonstrably reduces the turnaround time for KYC verification by automating the validation process, instantly verifying KYC details & digitizing the documentation involved.
Video-based KYC verification procedures have been shown to reduce TAT from 10 days to within 10 minutes.
Increased productivity & fewer documentation errors
Video KYC boosts worker productivity by removing the inefficiencies associated with paper-based documents & manual workflows.
Reports estimate that digitizing paperwork can boost productivity by 20%, and the usage of AI-powered verification techniques further boosts efficiency by reducing potential verification errors.
Seamless onboarding journey with fewer drop-offs
Previous paper-based KYC procedures were often too fragmented & slow, resulting in about 40% of customers abandoning the KYC verification process.
Video KYC ensures a smooth & seamless onboarding process for customers by making the process entirely digital & automated, which is directly in line with customer demands, since more 55% of customers prefer a digital method of identity verification.
Surveys have further indicated that automating KYC procedures reduces KYC drop-offs by 20%.
Usage of cutting edge technology
All the circulars released regarding Video KYC encourage the use of AI & other emerging technology to enhance the Video KYC process.
SignDesk has taken this as an opportunity to strengthen our KYC verification solution with cutting edge AI-powered document verification, OCR-based image data extraction, facial matching capabilities & ML-enabled fraudulent profile filters.
Reports have shown that automating KYC procedures using AI technology massively reduces expenses & boosts ROI.
Safety & security are prioritised
Fraud, cyber-crimes & money laundering have been huge problems for FIs and were the primary reason for instituting KYC norms in the first place.
Banks & insurers pay millions of dollars in fraud-related fines every year, and cases of financial fraud have only been on the rise in the last year due to the trend of digitization.
Additionally, the conditions brought about by COVID-19 have rendered people unable to have physical interactions, thus increasing the need for a presence-less form of onboarding.
Video KYC solves all these problems by incorporating strong security protocols, ML-powered filters, data security measures & a completely digital workflow for remote & presence-less KYC verification.
Therefore, Video KYC can both greatly mitigate fraud & help vulnerable people receive the financial and insurance services they need.
Award-Winning & Automated Video KYC
SignDesk is an award-winning provider of AI-powered verification and documentation solutions to businesses.
Our verification solutions have helped 250+ clients reduce onboarding expenses, cut down on KYC drop-offs, reduce TAT by 99%, and safeguard against fraud using cutting edge compliance technology. Our efforts to automate KYC have additionally been recognized in the form of numerous awards,
Are you ready to join 250+ enterprises and start onboarding with Video KYC? Book a demo with us now and let’s get started!