What is Central KYC or cKYC?
When you do any transaction such as if you want to open a Bank account, or buy a Mutual Fund or buy insurance each of these institutions have to do KYC or Know your Customer. The Central KYC (cKYC) has been brought in to make the life easier for investors. So completing KYC process with any bank, Mutual Fund, or an insurance company will be enough and you won’t have to do this process again anywhere. Before the Central KYC (cKYC) there were separate KYC formats for different financial institutes like Mutual Funds, banks etc. The introduction of Central KYC (cKYC) aims to eliminate this dissimilarity across the investment platform.
Central KYC (cKYC) will store all the customer information at one central server that is accessible to all the financial institutions. After opening a KYC account, you will get a 14-digit identification number. So, you just have to show this number at the time of a new investment or purchasing a financial product with a financial institution. The number will have all your details saved centrally. It will save you and the company or bank from completing the tedious process of KYC all over again.
What is the difference between KYC, eKYC, and cKYC?
The objective of the KYC guidelines is to prevent identity theft, financial fraud, money laundering and terrorist financing. Money laundering is the process of concealing the source of money usually obtained through illegal sources such as drugs and arms trafficking, terrorism, extortion and theft. Our article Know Your Customer or KYC discusses why KYC is required.
KYC or Know your Customer: is the known and regular process in the Banks/Mutual Funds whereby the identity of an investor is verified based on written details submitted by him on a form, supplemented by an In Person Verification (IPV) process. Once the verification is done successfully, the relevant investor data is entered into the KRA Registration Agency (KRA) system and subsequently uploaded to their database.
eKYC or electronic KYC: is KYC done with the help of an investor’s Aadhaar number. While completing the eKYC for Mutual Funds, the authentication of the investor’s identity can be done in following ways. Our article Aadhaar eKYC,eSign: Paperless for PAN, eNPS, Mutual Funds, Insurance discusses it in detail.
cKYC or Central KYC is an initiative of the Government of India where the aim is to have a structure in place which allows investors to do their KYC only once. CKYC compliance will allow an investor to transact/deal with all entities governed/regulated by Government of India / Regulator (RBI, SEBI, IRDA and PFRDA) without the need to complete multiple KYC formalities which are an inconvenience/hindrance as of now. It will allow for larger market participation by investors, easing their journey on the financial highway. The CKYC processing is handled by CERSAI.