KYC Verification

Video KYC Regulations in India and Master Directions from RBI

Amit Das

Table of Contents

In recent years, the Reserve Bank of India (RBI) has emphasized adopting digital solutions to streamline banking processes and enhance customer convenience. A pivotal initiative in this direction is the introduction of Video KYC (Know Your Customer), which enables banks and financial institutions to verify customers’ identities digitally. Recent updates to KYC norms, reflecting the rapid evolution of digital infrastructure and heightened security standards, have further refined this process.

What is Video KYC?

Video KYC is a process where financial institutions verify a customer’s identity through a live video interaction. It adheres to the guidelines issued under the RBI’s Master Direction on KYC norms, eliminating the need for in-person visits while ensuring speed, security, and efficiency.

Recent Updates in KYC Regulations

  1. Central KYC Registry Integration: The RBI has mandated the integration of Video KYC data with the Central KYC Registry, simplifying the process for customers across institutions.
  2. Digital Public Infrastructure: The use of India Stack components like DigiLocker and e-KYC APIs has been emphasized to improve accessibility and reliability.
  3. Enhanced Security Protocols: The RBI now requires multi-factor authentication and advanced fraud detection mechanisms, such as real-time anomaly detection during video interactions.
  4. Wider Applicability: Video KYC is now extended to Non-Banking Financial Companies (NBFCs), insurance firms, and payment service providers.
  5. Inclusive Measures: Specific provisions have been added to accommodate rural and underserved populations, including language support and offline Aadhaar verification.

Key RBI Guidelines for Video KYC

  1. Customer Identification:
    • A live video interaction is mandatory, conducted by an authorized KYC officer.
  2. Document Verification:
    • Valid documents such as Aadhaar, PAN, and proof of address must be submitted through DigiLocker or scanned copies.
  3. Location Tagging:
    • Customers’ locations must be geotagged during video interactions to validate their geographical presence.
  4. Liveness Check:
    • Real-time liveness detection ensures the customer is physically present.
  5. Recording and Archival:
    • The entire video KYC process must be securely recorded and archived for regulatory audits.
  6. AI and ML Tools:
    • Financial institutions are encouraged to use Artificial Intelligence (AI) and Machine Learning (ML) for facial recognition, document validation, and fraud detection.
  7. Regulatory Compliance:
    • The Video KYC process must adhere to the Prevention of Money Laundering Act (PMLA), 2002.
  8. Audit Trail:
    • Institutions must maintain a comprehensive audit trail for regulatory inspections.

Steps in the Video KYC Process

  1. Schedule the Interaction:
    • Customers schedule a video call with the institution’s KYC officer.
  2. Join the Video Call:
    • Customers connect using a smartphone or computer with a stable internet connection.
  3. Submit Documents:
    • Required documents are digitally presented.
  4. Identity Verification:
    • The KYC officer validates identity using documents and facial recognition.
  5. Liveness Check:
    • Customers perform specific actions (e.g., blinking, moving their head) to confirm physical presence.
  6. Completion:
    • Upon successful verification, the application is approved.

Benefits of Video KYC

  • Convenience: Eliminates the need for physical branch visits.
  • Speed: Significantly reduces processing time.
  • Cost-Effective: Minimizes operational costs for financial institutions.
  • Enhanced Security: Incorporates advanced technologies to detect and prevent fraud.
  • Financial Inclusion: Extends services to remote and underserved regions.

Challenges and Limitations

  • Technical Issues:
    • Reliable internet and compatible devices are prerequisites.
  • Privacy Concerns:
    • Institutions must implement robust data security measures to prevent breaches.
  • Accessibility Barriers:
    • Limited digital literacy and infrastructure in rural areas remain a challenge.

Conclusion

Video KYC is revolutionizing the Indian BFSI industry, fostering a seamless and secure banking experience. With recent regulatory updates and technological advancements, it has become a cornerstone of India’s digital financial ecosystem. By prioritizing inclusivity and innovation, Video KYC is paving the way for a more accessible and efficient financial system.

Check out here, the recent Master Direction – Know Your Customer (KYC) Direction. For more questions and commercial quotes, write to sales@think360.ai or dial +91 8779798844.