MUMBAI: That banks’ KYC norms have been so cumbersome and still they remain so is not news. But it became national headlines when the former Reserve Bank governor Raghuram Rajan had to airdrop R Gandhi, his deputy governor in-charge of banking supervision, to Hyderabad so that his immediate predecessor Duvvuri Subbarao could open a bank account with a Jubilee Hill branch of the State Bank.
Subbarao was refused a new savings bank account service by a Hyderabad branch of SBI because the person concerned at the branch could not recognise the immediate past governor of the central bank and thus refused to let him open an account for want of all KYC documents primarily not having a valid address proof.
Subbarao, the civil-servant-turned-central-banker, had been mostly in central service and has been away from his hometown for decades. But he became a victim of his own regulations is a sad joke of the system on one hand on the other it also shows how seriously banks took the stringent KYC conditions. This was despite being a Telegu with a home in Hyderabad, he did not have the relevant address proof of the property that met the stringent KYC norms of banks. More ironically, it was the same RBI under his governorship which had tightened the KYC norms the most.
The maverick governor that Rajan was, did much of the heavy lifting to ease the KYC burden for the public, but with limited success. Most KYC norms remain as stringent as they were during Subbarao’s five-year term ending in September 2013—perhaps even more so today.
Rajan used this anecdote in a public speech to illustrate the need to re-examine regulations that, if too bureaucratic and cumbersome, could hinder financial access for ordinary people, including former high officials.
But not just a former RBI governor even the lesser mortals will not be facing such difficulties soon if the nation’s largest lender SBI has its way.
The State Bank is embarking on a major overhaul to cut the cumbersome know-your-customer (KYC) process to a single one across its branches, from around 15 steps now, the chairman of the bank has said.
“We are targeting to complete the process by the end of March 2026 wherein there will be only one KYC verification process under which a customer who has completed the KYC for one service will not be asked to repeat the process for another service from the bank, instead the department concerned will source it from within the bank”, chairman CS Setty said, adding that once its gets a unified KYC, it will start a department within the bank to offer "KYC as a service" to various other functions.
"We realise that there are as many as 15 different ways the E-KYC is being done in SBI alone. So, we want to actually revise our own processes and bring them down to just one," Setty told reporters at the post-earnings presser here Tuesday.
Explaining the cumbersome process followed at present, Setty said each time a customer seeks to access a newer service, like provident fund or a home loan, she/he is forced to do a new KYC every time even though the bank is the same.
The chairman said the effort to streamline KYC is a part of the "Saral' project launched in July this year and that this is part of the "process reengineering" efforts at the bank which has over 530 million customers.
A team of over 50 people is working on the new KYC project, and it will take up to two months for them to just understand the process, after which they will build the solution, Setty said.
The KYC guidelines, under which a customer establishes his or her identity using documents such as the Aadhaar, Pan Card or passport, have been among the challenges for the banking system as a whole and the RBI has also flagged difficulties around the same.
The Financial Stability Development Council has also taken note of the challenges, and efforts have also been mounted to have a single KYC process for accessing all the financial services governed by all the regulators.
