KYC Registration Agencies (KRAs) Adapt to Recent KYC Changes

What is KYC and Why is it Important?

“Know Your Customer” (KYC) is a foundational element in financial markets, designed to prevent money laundering and other illegal activities. The Prevention of Money Laundering Act (PMLA) and sector-specific regulations set guidelines for robust KYC frameworks. These guidelines ensure financial markets operate securely while allowing for easier investor services and offerings.

The Role of KYC Registration Agencies (KRAs)

KYC Registration Agencies (KRAs) are a centralized system for maintaining KYC records in the securities market. Under SEBI KRA Regulations 2011, KRAs are operated by institutional and SEBI-registered entities. They ensure that KYC data is stored, verified, and updated in a uniform manner, allowing any financial intermediary to access and use the data with investor consent. This avoids the need for re-submission of KYC documents across different financial institutions.

KRAs and Their Operations

Currently, five KRAs are registered with SEBI: CDSL Ventures Limited, NSDL Database Management Limited, CAMS, Karvy, and Dotex (NSE). These agencies have been providing interoperable KRA services in the securities market since 2011, holding records for 10.83 crore investors. They have reduced the need for intermediaries to register with multiple KRAs and have facilitated seamless KYC data storage and modification.

Status of KYC Records and Extended Verification

As of March 31, 2024, 73% of KYC records are “KYC validated,” 15% are “KYC registered,” and 12% are “KYC on-hold.” SEBI has taken additional steps to strengthen the KYC framework, requiring KRAs to perform extended verifications, including:

– Validation of PAN and PAN-Aadhaar linking status with the Income Tax database.

– Verification of KYC data using Aadhaar records, with digital confirmation from UIDAI/DigiLocker.

– Email and mobile verification via Email/SMS to confirm contact details.

This extended verification was completed in March 2024, resulting in enhanced data quality and increased accuracy in KYC records.

Investor Access and Support

Investors can verify their KYC status through any KRA website. If any modifications are required, they can submit re-KYC through their intermediary’s or mutual fund’s website, which are integrated with the KRAs. KRAs also offer dedicated helpdesks and call centers for investor assistance.

Additionally, KRAs send communications to intermediaries and investors, updating them on KYC status and any changes to the KYC records. This communication process ensures that investors are kept informed and can take necessary action if needed.

In summary, KYC Registration Agencies are central to the seamless operation of financial services, providing a robust framework for KYC data storage and verification. They play a key role in enhancing financial security while ensuring ease of services for investors and intermediaries.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.