eKYC: Meaning and Process

eKYC, often called paperless KYC, is the process of electronically verifying the customer’s credentials. This is mandatory for everyone to avail of the services from any financial institution. It is also called Aadhaar-based eKYC as your identity is verified electronically wherein the service provider can access the details of your Aadhaar from the Unique Identification Authority of India (UIDAI) database. Thus, this provides your proof of identity and address to the service provider instantly, eliminating the need for tedious in-person verification.

eKYC Process

Aadhaar-based eKYC depends on the information provided by an individual to UIDAI to receive the unique 12-digit Aadhaar number. Upon receiving your Aadhaar number, it is easy to invest in fund houses as they use the eKYC Application Programming Interface (API) to get access to your Aadhar information. Through this, any licensed service provider can then verify a customer.

Types of Aadhaar eKYC:

There are two types of Aadhaar-based eKYC:

1. Using Biometrics: Here, you have to provide your 12-digit Aadhaar number along with biometrics such as fingerprints or iris scan and if you are interested in investing, then the relevant authority in the fund house will complete the verification process through this method.

2. Using OTP: In this case, you have to provide your Aadhaar number, and an OTP will be sent to your registered mobile phone which will then complete the whole transaction process.

Difference between Aadhaar authentication and Aadhaar eKYC:

There are some differences between Aadhaar authentication and Aadhaar KYC. In Aadhaar eKYC, the service provider gets access to your data from the UIDAI database, whereas Aadhaar authentication merely establishes your credentials. Simply put, it is not necessary to provide demographic details to get verified by Aadhaar authentication.

Aadhar eKYC and government regulations:

The Supreme Court in September 2018 provided a monumental judgment by barring private entities from using Aadhar eKYC for verification. Following that, UIDAI allowed Aadhaar eKYC for authentication purposes to private establishments. The Aadhaar and Other Laws (Amendment) Act, 2019, paved the way for online KYC verification wherein individuals voluntarily use the Aadhaar number to verify their identities, either through Aadhaar-based online KYC verification or through offline eKYC. Thus, the new stringent rules allow KYC verification online only for private entities, which have been verified by the UIDAI which prevents your Aadhaar data from being misused.

Understanding offline eKYC:

The following offline methods can be used to verify the identity of the customer:

1. QR Code Scan: Here, the service provider can scan the QR code provided on your Aadhaar card to get access to the demographic information using a smartphone, without the requirement of accessing UIDAI’s Aadhaar database.

2. mAadhaar App: This is a mobile-based app allowing service providers to access demographic data.

3. Paperless offline KYC: Here, a customer need not provide a photocopy of the Aadhaar card, and can instead download the KYC XML from UIDAI’s web portal. This process absolves the requirement for revealing Aadhaar number (instead a reference ID is shared) and doesn’t require biometric verification.

How do I complete KYC online?

After creating your account at the eKYC portal of any KRA, you need to fill in your personal details like your Aadhaar card number along with your registered phone number on which you will receive an OTP. Post-verification, you have to submit a copy of your self-attested Aadhaar card. Once all this is completed, you can check your status by providing your PAN number at the KRA’s web portal.

KYC compliance can also be done via an offline process wherein you just need to download the KYC form online and submit the form along with the requisite documents to the relevant authorities.

How to change KYC details online?

Digital KYC records can be changed by visiting the eKYC portal of your choice, like any KRA wherein you will click on the ‘Update KYC’ link. Fill in the new details, besides uploading the scanned copy of the updated documents - to establish the proof for the changes after which you will receive an OTP on your registered mobile phone number. Post-verification, you can click on submit and the details will be changed within a week.

Conclusion:

Thus, eKYC is a paperless process to fulfil the mandatory KYC requirements, before you begin your investment journey. KYC obligations through Aadhaar-based eKYC can be completed if you are interested in investing in stock markets. If you are interested in mutual fund investments as per SEBI regulations - OTP-based eKYC mutual fund investments are subject to the limit of only Rs 50,000 per annum and if you want more you can avail of the process of In-Person Verification (IPV) or Biometrics-based verification.

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