What is eKYC? - Meaning, Online and Offline Process

When everything around us is going digital whether it is our shopping, payments, food, or other services. So, why not digitally verify our identity in financial products and services? This is what an eKYC can do, identity verification in your bank accounts or Demat Accounts in the comfort of sitting at your home.

What is eKYC and Why is it Important?

The eKYC full form is Electronic Know Your Customer. It is the electronic form of the KYC process to collect personal and professional data from users in order to identify and register them online.

Firstly, what is KYC? KYC is the process of verifying the customer or account holder by their bank accounts, brokers, or other financial institutions. It came into existence in 2002 and was made mandatory in 2004 by the RBI to conduct verification of all its new and existing customers. This process is also known as anti-money laundering. The main reason to start KYC by the RBI is to prevent fraudulent activities in the financial system and to protect online businesses.

Similarly, eKYC meaning is directly related to an electronic or online method of KYC verification of account holders. It is also called an Aadhaar-based eKYC online to verify electronically wherein the service provider can access the details of an Aadhaar holder from the Unique Identification Authority of India (UIDAI) database. Thus, this provides the candidate's proof of identity and address to the service provider. The basic requirement is to have a valid 12-digit Aadhaar number registered with a phone number. eKYC is required before making investments and opening an account for the first time with banks, brokers, or any other financial institution.

eKYC Online Process

eKYC online registration can be done by making an application at the web portal of any of the five SEBI-licensed KRA’s (KYC Registration Agency) which are CDSL Ventures Limited, NSDL Database Management Limited, DotEx International Limited, CAMS Investor Services Private Limited, and Karvy Data Management Services Limited.

It is easy to invest in fund houses or to open a bank account online as they use the eKYC Application Programming Interface to get access to your Aadhaar card’s information such as name, age, and address. Through this, any licensed service provider can verify their customer.

There are two methods to do e-KYC online. Aadhaar OTP allows you to get the KYC done quite easily in minutes and you are allowed to invest only up to ₹ 50,000 p.a. in a fund. If your KYC is done in an Aadhaar-based biometric, an executive from the KRA or fund house will visit your location for the verification process and the bar of ₹ 50,000 is removed.

Aadhaar OTP

For verifying your identity by any financial institution such as a broker or bank, you have to provide your Aadhaar number which is linked to your mobile number and an OTP will be sent to you. After that, you can fill out the OTP and complete the whole transaction process.

The six steps to do Aadhaar OTP eKYC online by an individual are

1. Visit the official website of any SEBI-registered KRAs and give your consent to the process on the verification platform.
2. Create an account by filling in your personal details.
3. Enter your Aadhaar number which should be registered with your mobile number.
4. An OTP (one-time password) is sent to your registered mobile number and needs to fill it in the input.
5. Submit your self-attested copy of your e-Aadhaar.
6. Agree to the terms and conditions to process your data.

Aadhaar-based Biometric KYC

For verifying your identity by any financial institution such as a broker or bank, you have to provide your 12-digit Aadhaar number along with biometrics such as fingerprints or eye scan, and then the service provider will complete the verification process by sending a representative at your location or through webcam.

The three steps to do Aadhaar-based Biometric KYC by an individual are 

1. Log on to the KRA website and opt for biometric authentication in the registration form. 
2. Following the submission of the form, a representative will pay a visit to the applicant’s location. A scanner is used to obtain an image of the retina or fingerprints.
3. The KYC process will be completed once the authentication is completed.

eKYC Offline Process

The following offline methods can be used by any registered financial institution such as brokers, fund houses, or banks to verify the identity of their customers.

1. QR Code Scan 
   The service provider can scan the QR code provided on an Aadhaar card to get access to information such as name, age, and address without the requirement of accessing UIDAI’s Aadhaar database.
2. mAadhaar App 
   This is a mobile-based verification in Demat account apps provided by the brokers allowing them to access the demographic data of a user.
3. Paperless offline KYC 
   A customer is not required to provide a photocopy of the Aadhaar card to a service provider and can instead download the KYC XML from UIDAI’s web portal by filling out the offline eKYC form. A reference ID is shared with the customer and through this ID, service providers can access the details such as name, age, gender, and address of the user from that XML file.

Other documents required for eKYC

1. For individuals 
   For eKYC India, you are required to submit proof of identity and proof of address.
   • For proof of identity Aadhaar Card, Passport, Voter ID card, driving license, PAN Card or any other government-authorized document with a photograph can be considered. For proof of address Aadhaar card, Passport, Voter ID card, ration card, driving license, telephone bill, electricity bill, and copy of the passbook can be considered.
2. For non-individuals 
   eKYC is not just applicable to individuals but also to non-individuals such as partnership firms, trusts, corporate, institutional investors, banks, bodies of individuals, cooperative societies, foreign institutional investors, or any other government body are required to submit a copy of balance sheets for the last 2 financial years, certificate of registration, copy of partnership deed, authorized signatories list with specimen signatures, photograph, PAN of partners, etc. in addition to proof of address and proof of identity.

Pros and cons of eKYC

The eKYC has the following advantages:

• eKYC has time-saving and cost-saving benefits. You can easily register to any account such as a bank account or Demat account with eKYC sitting at your home and also reduce the cost of traveling to any center.
• eKYC provides a secure and reliable database to store the user’s data in the Central Identities Data Repository which also prevents any fraud or theft of data.
• eKYC provides the whole paperless experience to the users with an e-Aadhaar-based verification. Aadhaar will directly be applicable for both the proof of identity and proof of address.
• It also provides a seamless experience for companies, banks, brokers, or other financial institutions to store the data in an electronic form which saves a lot of time and cost for them to maintain any user data.

The eKYC has the following disadvantages:

• Despite all the advantages, there is a limit at a maximum level to the bank account balance to be maintained each year.
• There is also a limit on the amount of money that can be invested into an account each financial year if eKYC is done using Aadhaar OTP.
• After every subsequent year, full KYC must be performed to use a minimum KYC account.

Conclusion

eKYC provides a one-click approach experience to its users to fulfill all the KYC obligations. Remember that it is a mandatory requirement to be completed in India for anyone to trade in the stock market, open a bank account, or invest in a mutual fund. An individual can do their eKYC on SEBI’s registered website as well as any service provider can also verify the individual details using eKYC be it any stockbroker, depository, bank or any other financial and government institution.