T V Somanathan committee to finalise KYC Rules

Source-This post on T V Somanathan committee to finalize KYC Rules is based on the article “Govt forms panel headed by T V Somanathan to finalise uniform KYC norms” published in “Business Standard” on 26th February 2024.

Why in the News?

The government has recently established an expert committee under Finance Secretary T V Somanathan to make recommendations for implementing uniform Know Your Customer (KYC) norms across various sectors.

What are the objectives of the committee?

Background– After the Financial Stability and Development Council (FSDC) talked about a plan for standard KYC norms, the government set up this committee to address issue of uniform KYC norms across various sectors.

1. Objective- The committee will suggest how to apply uniform Know Your Customer (KYC) norms across different sectors.

2. Input from FSDC members– The committee plans to seek input from all members of the Financial Stability and Development Council (FSDC) regarding KYC norms. For example, the Ministry of Corporate Affairs would share its practices regarding the use of the permanent account number (PAN) as a common identifier for company incorporation.

What is Know Your Customer (KYC)?

1. It is a comprehensive process used by businesses and financial institutions to verify the authenticity and identity of their customers.

2. KYC is mandatory for all customers before investing or opening a bank account.

3. Currently in India, different KYCs are required for various financial products like opening a bank account, investing in mutual funds, purchasing life insurance, or investing in retirement savings funds.

4. Having to do multiple KYCs and updates can deter new investors. To streamline KYC for investing in various financial assets, the central government introduced the Central KYC Records Registry.

What is Central KYC Records Registry?

1. About– The Central KYC Registry stores KYC records of customers in the financial sector using uniform norms.

2. Aim- It aims to reduce the inconvenience of submitting and verifying KYC documents every time a customer initiates a new relationship with a financial entity.

3. Launched– It was launched by central government in 2016.

4. Limitation– It has been restricted only to the capital markets.

UPSC Syllabus- Indian Economy