On 9th January 2020, the Reserve Bank of India (RBI) has announced the video based Know Your Customer (KYC) guidelines which is a very effortless option to establish the identity of the customers. As per the new guidelines, the fintech startups and digital Non-banking Financial Companies (NBFCs) can remotely vet the customers through the online mode. Also, this step is like a big relief for these lending companies as it would be a huge cost cut in several ways owing to the avoidance of meeting the customers in person for the verification process.
The Reserve Bank of India has placed certain rules for regulated entities involved in the verification process.Also, the process can be done only by an authorized officer of the Reporting Entity (RE) who is specifically trained for this purpose. This audio visual interaction will be the finest way to carry out the customer identification process. Here, the officials shall take the photograph of the customer along with the video recorded and obtain the identification information.
In order to prevent the act of money laundering, the RBI has recommended to the authorized officers to store the recorded videos in an extremely safe and secure manner. Also, these videos must include the geo-tagging i.e. the video should consist the location, time and the date where it was recorded. This high-level of verification incorporates the use of the most up-to-date technologies, artificial intelligence and face matching algorithms to ensure the integrity of the customer information and process.
After the judgment passed by the Supreme Court in the year 2018 regarding the disallowance of usage of Aadhar card by private companies, there have been several requests made to the authorities to bring in an alternate plan in the Know Your Customer guidelines in order to make the onboarding process of the customers easier. Later in May 2019, the RBI released new offline KYC rules which allowed the banks to carry out authentication or offline-verification through Aadhar card for individuals who were voluntarily allowing the use of their Aadhaar number. This new move was welcomed by the fintech industry and now the new guidelines have been a brownie point not only for the expansion of the businesses of the startups but also a healthy sign for the enhancement of the financial ecosystem altogether.
This new guideline is not only a positive progress but also a pragmatic approach and a much deeper dive into the digital verification process. It is also a constructive step towards an effortless, paperless and most cost-effective efforts for the KYC process.