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How to automate KYC while being compliant with RBI guidelines?

Sahil Mathur

If you are a part, have been a part of the banking and payments sector then you know what I mean when I say RBI and its regulations dictate everything that happens there. Right from how customers need to be acquired to how they should be interacted with and where or where not the money received should go.

As such the past year especially has been eventful, RBI came up with 2 major regulations for the sector,

  1. Use Aadhaar eKYC or Offline Aadhaar for KYC
  2. Don’t use third-party DSAs(direct service agents) to acquire customers.

Both of these had a significant effect on how the companies in the sector i.e. banks, NBFCs, and payment banks function.

During our time in the industry, we have served some of the largest organizations in BFSI and it made sense for us to have our team sit on these recent changes and figure out what is the best course of action for us and customers to be able to onboard customers while being compliant with the latest regulations.

What did we do?

We got our legal team to sort through hundreds and hundreds of pages of regulations, guidelines, documentation, and news on subjects ranging from PMLA, KYC, to customer onboarding and OVDs from regulators including SEBI, RBI, UIDAI, IRDAI, and NCPI in order to figure out what the best way to do KYC was.

What did we find?

There were 2 things that we found out,

  1. Offline KYC is an alternative to eKYC
  2. DSA’s can’t be used for KYC or verification of documents, but they can still be part of the process.

Here is the original question we started out to answer

” How do we KYC customers, without having to invest in a large workforce of agents, meanwhile being compliant with regulatory guidelines ?”

The solution

Here is the answer we think makes sense,

The easiest way to KYC a customer would be to use Aadhaar eKYC or after the supreme court judgment, Aadhaar Offline KYC to verify the customers.

Though in most cases this might not be feasible, especially if your customers are from Tier2 or Tier 3 cities, where our data suggests that most residents do not have access to the mobile number or email connected to their Aadhaar, making it harder for the customer to download XML from UIDAI website required for KYC verification.

The second way would be to use what we call an “Agent assisted Video ID KYC”. Unlike the traditional approach where the agent (DSA in this case) visits, collects and verifies the document, in this case the agent is just required to collect a digital copy of the documents from the customer, along with a live video of the customer which is matched with the photo on the document. All of this is done via a dedicated app provided to them for the purpose or a web browser-based portal.

This information is then sent to a dashboard manned by your employee who eyeballs the documents and the video/image of the customers to verify the authenticity.

Once done, the identity is verified and KYC is complete.

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