Banking Video KYC Regulation in India

In recent years, the Reserve Bank of India (RBI) has emphasized the adoption of digital solutions to streamline banking processes and enhance customer convenience. One such initiative is the introduction of Video KYC (Know Your Customer), a regulation that allows banks and other financial institutions to complete the customer verification process digitally.

What is Video KYC?

Video KYC is a process where financial institutions verify a customer's identity through a live video interaction. This method complies with the guidelines issued by the Reserve Bank of India under its Master Direction on KYC norms. It eliminates the need for in-person visits, making the process faster, secure, and more efficient.

Key RBI Guidelines for Video KYC

1. Customer Identification:

   • A live video interaction is mandatory.
   • The interaction must be conducted by an official authorized by the financial institution (referred to as a KYC officer).

2. Document Verification:

   • Valid documents must be submitted, including Aadhaar, PAN, and proof of address.
   • The documents must be verified through DigiLocker or scanned copies.

3. Location Tagging:

   • The customer’s location must be geotagged during the video interaction.

4. Liveliness Check:

   • The video interaction must include real-time liveness detection to ensure the customer is physically present.

5. Recording and Archival:

   • The entire video KYC process must be recorded and stored securely by the institution for future reference.

6. AI and ML Tools:

   • Banks can use Artificial Intelligence (AI) and Machine Learning (ML) tools for facial recognition, document validation, and fraud detection.

7. Regulatory Compliance:

   • The Video KYC process must comply with the Prevention of Money Laundering Act (PMLA), 2002, ensuring that all anti-money laundering (AML) measures are followed.

8. Audit Trail:

   • Institutions must maintain an audit trail of the KYC process for regulatory inspections.

Required Documents for Video KYC

The following documents are typically required for completing a Video KYC process:

• Aadhaar Card
  • For identity verification through UIDAI authentication.
• PAN Card
  • For financial and tax verification.
• Proof of Address
  • Documents such as utility bills, passport, or driver’s license.
• Recent Photograph
  • Uploaded digitally during the process.

Technical Terms Involved

1. DigiLocker

• A government platform for storing and accessing digital versions of important documents.

2. UIDAI Authentication

• The process of verifying identity using Aadhaar credentials via OTP or biometric methods.

3. Liveness Detection

• A technology used to ensure that the individual participating in the video interaction is physically present and not using a pre-recorded video.

4. Geotagging

• Capturing and recording the geographical location of the customer during the KYC interaction.

5. OCR (Optical Character Recognition)

• Used for extracting data from scanned documents and images during the verification process.

Steps in the Video KYC Process

1. Schedule the Interaction:

   • The customer schedules a video call with the bank’s KYC officer.

2. Join the Video Call:

   • The customer joins the video call at the scheduled time using a smartphone or computer with a stable internet connection.

3. Submit Documents:

   • Required documents are presented digitally.

4. Identity Verification:

   • The KYC officer verifies the customer’s identity using the documents and facial recognition.

5. Complete Liveness Check:

   • The customer performs actions (e.g., blinking, head movements) to prove they are physically present.

6. Process Completion:

   • Once all checks are successfully completed, the KYC officer approves the application.

Benefits of Video KYC

• Convenience: No need for physical branch visits.
• Speed: Reduced processing time.
• Cost-Effective: Saves operational costs for banks.
• Security: Advanced technologies like AI ensure robust fraud detection.

Challenges and Limitations

1. Technical Issues:

   • Requires stable internet and compatible devices.

2. Privacy Concerns:

   • Sensitive data must be securely stored to prevent breaches.

3. Limited Accessibility:

   • Customers in rural areas may face challenges due to lack of digital infrastructure.

Conclusion

Video KYC is a transformative step towards digitizing the banking ecosystem in India. By leveraging cutting-edge technologies, it ensures a seamless, secure, and efficient verification process, paving the way for greater financial inclusion.

For more information, refer to the RBI’s Notification on Video KYC.