KYC guidelines of RBI

In 2002, RBI had issued directive to all banks for complying with the procedure of ‘know your customer’ in respect of all of their new and existing domestic and non-resident customers. KYC establishes the identity and residential address of the customers by specified documentary evidences. One of the main objectives of KYC procedure is to prevent possible misuse of the banking system for money laundering and financing of terrorist activities. RBI has stipulated that banks should show strict adherence to ‘KYC’ guidelines and monitoring of cash transactions based on prescribed norms (above specified amounts). The ‘KYC’ guidelines, issued by RBI, reinforce the existing customer identification practice of banks. KYC guidelines have to be compulsorily adhered by banks in regard to all of their customers who maintain domestic or non-resident rupee or foreign currency accounts with them. This would prevent illegal moneys coming into the banking stream. Accounts opened by individuals, group of individuals, companies, firms, religious trust accounts and non-religious trust accounts etc. should be subjected to KYC procedure.