Identity of customers in banking and financial services is ensured through Know Your Customer (KYC) process. However, reports of its misuse often come to light. The government plans to implement new measures under Central KYC to prevent increasing misuse of KYC data and ensure customer safety.
What are the new measures?
The government has proposed two major measures, which will come into effect from January 20, 2025.
- Hiding KYC identifier details:
- The data of identity cards like Aadhaar, PAN card, voter ID card, and driving license will now be safe.
- Only the last four digits of these documents will be shown to the institutions.
- This will ensure that no intermediary can see the complete information of the customer.
- Unique IP Address:
- Now only Related Entities (REs) will be able to access KYC data through unique IP address.
- The role of third-party, which earlier used their IP to access KYC data, will end.
The new system: what’s going to change?
- Security of KYC details:
- Now customer information will be hidden, so that illegal access to data by third-party or any intermediary will not be possible.
- CKYC ID:
- Each customer will receive a unique CKYC ID, making KYC identifiers secure and confidential.
Two-stage strategy for data security
- First Step:
- KYC identifiers will be hidden.
- Any unauthorized intermediary will be prevented from accessing customer data.
- Second step:
- All Reporting Entities (REs) must use unique IP address to access CKYC data.
- REs must ensure that CKYC data is kept secure with cyber security standards and control measures.
Stopping data misuse and cyber crime
- Ending the role of mediators:
- Earlier many institutions used to access KYC data using third-party services.
- Now this process will be ended.
- Customer Security:
- The new measures will help prevent cyber crime and misuse of KYC data.
Timeframe and Implementation
- Earlier these measures were to be implemented by 16 December 2024.
- On the appeal of the institutions, the deadline has been extended to January 20, 2025.
Tips for Customers
- Do not hand over your KYC documents to any third-party.
- Share your identity documents only with accredited institutions.
- Update your KYC information regularly.
