SEBI miffed with new KYC system

The Securities and Exchange Board of India (SEBI) is infuriated with the new central Know Your Customer (KYC) process executed for the complete financial system and has written to the Finance Ministry to alter the move, according to three sources. According to SEBI, the new rules are not in sync with the securities market KYC. It is said to disrupt the usual process of the KYC Registration Agencies KRAs.
The new process is being applied through the Central Registry of Secularization and Asset Reconstruction and Security Interest of India (CERSAI), an online registry by the central government. SEBI directed all market intermediaries, including brokers and mutual funds (MFs), to make new KYC submissions to CERSAI in a circular two weeks earlier.
The idea behind a centralized KYC is to ease entry into the financial system by doing this only once, with any financial sector intercessor – bank or insurance company or an MF. The new centralized KYC system has raised misgivings over the role of these KRAs, as an intermediary now has to report to CERSAI directly instead of these KRAs. More importantly, the documents required to open an account with a SEBI-registered entity aren’t similar to that instructed in the new central KYC system. The new system doesn’t insist on a PAN (income tax) number or in-person verification.
“As the new system doesn’t require PAN details, it runs the risk of duplication or investors creating multiple accounts. Also, the address proof requirement is different, which also creates the risk of investors opening accounts with fake address,” said a market intermediary.

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