A Complete Guide on KYC and eKYC

Since 2004, the RBI has made it compulsory for all financial institutions to verify the identity and address of all customers who conduct financial transactions with them. 

The RBI mandated that KYC (Know Your Customer) be the sole mode of verification. 

If you still have questions like ‘what is KYC in bank’ or ‘what is KYC document’, then read on.

What is KYC?

If the question ‘what is KYC’ is confusing you, don’t worry, we will get to it right away. 

KYC stands for 'Know Your Customer,' and it is an effective way for an institution to confirm and thus verify a customer's identity. 

This process is mandatory under the Prevention of Money Laundering Act, 2002. All customers need to provide supporting documents to prove their identity and addresses. Both online and offline KYC are acceptable and need to be done only once.  

Importance of KYC

If ‘what is the meaning of KYC’ is not completely clear yet, maybe reading further will help you.

KYC is an important tool because it protects financial institutions and prevents illegal activities. Often non-individual customers make extensive use of financial services such as opening a bank account, trading, and mutual fund investing. In such cases -

  • Banks have the right to verify an entity's legal status 

  • KYC includes cross-checking customers' operating addresses 

  • KYC involves verifying the identities of all beneficial owners and authorized signatories of an entity

  • KYC requires verification of the nature of the customer's employment as well as the business conducted by the customer

  • It aids an agency or institution to access and assess your past financial history

  • The agency or institution can perform an accurate risk assessment

  • KYC keeps you safe from frauds and money laundering activities, as your identity is verified beforehand

  • It also reduces the overall risk of your lending portfolio, contributing to higher profit margins

All in all, KYC helps verify the authenticity of an individual and/or company.

Types of KYC

KYC verification processes can be classified into two types. Both are equally good, and it depends on the customer which one they prefer. The types are - 

1. Aadhaar based KYC or eKYC

It is an online KYC, also referred to as electronic KYC. In this process, a customer’s address and identity are verified electronically through Aadhaar authentication. 

2. Offline KYC or In-Person-Verification(IPV) KYC

This process is carried out in person and a customer’s address and identity are verified through hard copies of documents.

Ways of KYC Verification

There are five methods of KYC verification. Take a look at them here - 

1. Online OTP-based or Aadhaar based KYC

Following the steps outlined below, Aadhaar OTP-based KYC online verification can be completed:

Following submission, your KYC application will be verified and approved by the UIDAI (Unique Identification Authority of India). 

2. Offline verification or Paper-based KYC

If you want to know ‘what is KYC in bank’, in most cases it will be easier for you to complete an offline KYC at your local bank branch. The following are the steps for it -

After submitting the KYC application, you will be assigned an application number. This number can be used to check the status of your KYC verification.

3. Paperless Offline eKYC

This is a new initiative by the UIDAI to secure your data when it is being shared. This will help an organization verify your identity without having to collect or store your Aadhaar number. To make use of this method, your mobile number must be linked to your Aadhaar card.

You can follow these steps to generate your Paperless Offline e-KYC -

4. Central KYC or CKYC

It is a central depository of customer’s KYC documents. Some of its features are - 

5. Video KYC

This method came around due to the restrictions during the pandemic. Details about this method are mentioned below - 

What is eKYC?

Now, let’s take a look at eKYC in detail. Following are some important points about the electronic KYC -  

Regulations on eKYC

What is Offline KYC?

The offline KYC may be In-Person Verification or Paperless KYC. Here are some details about the offline KYC - 

Documents required for KYC

Were you searching for ‘what is KYC document’? Then the answer is here! 

Here are the documents that you will need to complete your KYC process. There are generally two types of KYC documents accepted as proof - proof of identity and proof of address.

1. Proof of Identity 

This is required to establish an individual's identity. The following documents are generally accepted as a proof of identity -

2. Proof of Address 

This is intended to serve as proof of an individual's place of residence. Any one of the following documents are generally accepted as a proof of identity - 

In some cases, a document submitted may serve as both a proof of identity and address, and separate documents might not be necessary. 

Benefits of KYC

Following are the benefits of KYC:


KYC is mandatory if you wish to conduct any type of financial transaction. Completing your KYC in time helps you keep your bank account (or any other account)safe. To prevent fraud, the RBI mandated that all transactions be carried out only after a careful assessment of the customer's identity and address.

You can now complete your KYC process within minutes on most apps using options like paperless KYC, and video KYC.  So, don’t delay completing your KYC!

KYC Related FAQ's

KYC simply means Know Your Customer. It has been put in place to authenticate you, and protect you from frauds or illegal activities.

In banking you need to complete your KYC from the beginning, i.e., when you open an account. You may also require to frequently update your KYC. 

The main documents that you need to complete your KYC are your identity proof and your address proof. They can be any of your OVDs (Officially Valid Documents).

Yes, the process of KYC is completely safe. In case you are worried about your safety, you can use the KYC offline paperless process, and no one will be able to view your details without your permission.

There is no fee for KYC. It is completely free.

You can check your KYC status on the application portal by entering your application number or PAN card number.

KYC verification may be done online or offline. You can choose any one depending on your preference. 

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