ASSIGNMENT On the topic Know Your Customer Guidelines as advised by RBI for Indian banks.

Submitted to: Mr. Sunil Agarwal

Prepared by: Vijendra Pandey Enroll. # NF121333 NIFM, Faridabad

National Institute of Financial Management POST GRADUATE PROGRAMME (FINANCIAL MARKETS) 2012-13

KNOW YOUR CUSTOMER POLICY

ABOUT
KYC as the name implies is a policy concerned with Customers acceptance, Identification, Risk management and Monitoring under Prevention of money laundering Act- 2002.

INTRODUCTION
KYC revised Guidelines were issued by RBI in Nov. 2004 with a mandate to ensure the compliance with its provisions by 31st Dec. 2005

APPLICABILITY
KYC is applicable to all the customers of a bank, here customer may include Person maintaining self-account, beneficial owner, beneficiaries of transaction or any person with whose transaction there is a reputational or financial risk to the bank.

GUIDELINES
KYC Policy is based on following 04 key elements: Customer Acceptance Policy (CAP) Customer Identification Procedures (CIP) Monitoring of Transaction Risk Management

Customer Acceptance Policy (CAP) lays down criteria for customers acceptance. It ensures that there should be no anonymous or benami account with the bank, It also collects details of customer for risk perception, provides for documentation required & most importantly ensures that CAP didnt result in denial of services to the people belonging to lower strata. Customer Identification Procedure (CIP) involves identifying & verifying the customers identity through a reliable source or documents, it finds out the identity of the real owner of an account. Monitoring of transaction involves keeping vigil on every transaction made by a customer as per the risk-profiling, it involves comparing the amount of cash balance maintained and quantum of amount being transacted. Unusual large

amount transaction that is not in sync with the balance maintained shows that money is being washed. Risk Management involves profiling of every customer on the basis of quantum of risk associated with him. This is done by banks in consultation with its board members devising appropriate procedures to do the same. Small Deposits Accounts: It has been observed that so many times people, especially from the lower income group fail to produce the document required and hence are deprived of the banking services, for them there is a provision in KYC that theyll not have to provide any document but just Introduction from another account holder who has been subjected to full KYC procedure. Limits here are, total balance not exceeding Rs. 50,000 p.a and total credit not exceeding Rs. 1,00,000 p.a Closure of Accounts: It is the extreme step bank takes when it fails to identify the owner of an account, it may be due to non co-operation of the customer in providing the required details. Here banks close the concerned account after giving due notice to the related customer.

KYC Policy further calls for valuing all remittances of Rs. 50,000 or above done by debiting the customers account through cheque and not through cash payment. With the help of KYC Norms, it becomes easy for banks to identify suspicious accounts and their owners, all such suspicious transactions are firstly confirmed with the customers, in case of non-cooperation such details are then transferred to the FINANCIAL INTELLIGENCE UNIT OF INDIA (FIU-IND) which further probes into the matter. One of the most important aspect of this policy is that all the details of customers obtained under KYC Norms is to be kept confidential and under any condition shouldnt be shared with any 3rd party other than bank and customer itself.