- Date : 29/08/2019
- Read: 2 mins
NBFCs will use Aadhar-based KYC to eliminate repetitive documentation and reduce turnaround time for NBFCs
Customers have to repeat the Know Your Customer (KYC) process every time they seek a new service or investment from different financial institutions. This makes the process cumbersome and time-consuming.
In a bid to eliminate repetitive documentation and reduce turnaround time on customer onboarding, Finance Minister Nirmala Sitharaman recently permitted NBFCs in India to capitalise on the Aadhaar-based KYC done by banking institutions.
If you’re a customer looking to apply for a loan through an NBFC, you are not required to reproduce all your KYC documents such as address proof, PAN and Aadhaar for your loan, if you have already completed the KYC process with a bank before.
How does it work?
The government recently amended the Prevention of Money Laundering (PMLA) Act that looks to leverage technology and move to a paperless, digital eKYC process. The amendment clearly states the different modes banks and NBFCs can use to store customer data electronically.
All customer data can be easily captured, stored and accessed via a digital locker, including the GoI’s Digi Locker. The Aadhaar eKYC thus removes the need to provide physical documentation every time a customer engages with a financial institution.
How does it help?
Other than the fact that customer data can now be accessed in a few minutes from the digital locker, without compromising on security and revealing personal data, this move could also strengthen the relationship between banks and NBFCs/ Fintech companies.
Working across a shared platform, NBFCs may able to convince banks to incorporate a bouquet of new-age financial products that can help larger banks service a wider base of customers. This is especially applicable for the small-ticket retail loan segment with sachet size products that can reach out to millions of new Jan Dhan accounts which have been recently opened without having to repeat the KYC process.
RBI has taken a step towards process simplification by instating an NBFC-AA (Account Aggregator). However, the Fintech community is waiting for an operational update as to how this process will work. Take a look at some of the smart ways to reduce your loan stress to facilitate the loan process.