The Securities and Exchange Board of India is mulling doing away with the requirement of a fresh KYC (Know Your Client) for opening of new accounts in securities market if the investor has got a bank account.
Under the proposed move that may take a couple of months to come into effect, the market intermediaries â€” be it brokerage firms, mutual funds or any other SEBI-registered entity â€” would rather be allowed to use KYC checks conducted by the bank with which the investor has got an account.
SEBI is currently discussing the proposal with the RBI and the government, and a final decision would depend on these consultations, as also on various regulatory aspects, a top official said, while adding that the central bank has in-principle agreed to the proposed move.
Since having a bank account is as such mandatory for all investors, except for a few exceptions in the mutual fund space, the proposed step would help do away with duplication of efforts and further ease the KYC procedures.
SEBI has already streamlined the KYC procedures for the securities market and a single KYC is sufficient for any kind of account with any of the market intermediary.
The regulator also expects the new Aadhaar law to provide a big leg-up to the KYC procedures, while the Unique Identification Number has already made it easier.
In-person verification of the client is not required anymore if verification with UIDAI is carried out through biometric authentication (fingerprint or iris scanning).
Verification in such cases is carried out through one time password (OTP) sent on the clientâ€™s mobile number or e-mail address registered with UIDAI, if the amount invested does not exceed Rs. 50,000 per mutual fund in a financial year and if this payment is made through electronic transfer from the clientâ€™s bank account registered with that mutual fund.
According to SEBI Chairman U K Sinha, the common KYC for the entire financial sector is also in works, but the regulator in the meantime is considering allowing banksâ€™ KYC for the securities markets.
After SEBIâ€™s recent board meeting here, the regulator has created KYC Registration Agency or KRA and now one KYC is enough for all intermediaries in the securities markets.
â€œAlready, Aadhaar has made it very simple for KYC procedures to be conducted. Now, our next target is why canâ€™t we use the banksâ€™ KYC because all the transactions of securities market, except mutual fund transactions up to Rs. 50,000, have to take place through banks.
â€œTherefore, we can provide that since a person has a bank account that was opened after a KYC, there would not be any need for a fresh KYC to be done. We have taken up this matter with the RBI and with the government. RBI is also in-principle agreeable to it and I am hopeful that this will happen.
â€œThis would mean that if a person has a bank account, he would not need to go through a fresh KYC for any securities market account. This may happen in a couple of months,â€ he added.