Reserve Bank of India’s relaxation of know-your-customer norms to boost financial inclusion

Monday, June 16, 2014

The Reserve Bank of India’s decision to allow individuals to open bank accounts with a permanent address will provide a boost to the process of financial inclusion, according to bankers and industry experts.

This will not only bring migrant workers but also students and people with a transferable job into the banking fold, experts are of the opinion.

Rishi Gupta, chief operating officer & executive director, FINO PayTech, a Mumbai-based payments technology company that works in the financial inclusion space, said relaxing the Know Your Customer (KYC) norms for opening of accounts augurs well for the financial ecosystem, as it allows more people to use banking services. “Currently, RBI is relaxing norms to open bank accounts and this is the first step in the stage of financial inclusion. Once this is done, the second step will be to ensure these accounts remain active and made productive by using other basic and advanced financial services,” he added.

Reports point out that, according to RBI, in 2006, 150 million households across the country did not have a bank account. And if each household had presumably 4 members, than the number of people without a bank account was about 600 million.

In the last seven years, with the relaxation in the KYC norms, banks and technology-enabled business correspondents model, over 200 million no-frills bank accounts have been opened in nearly 300,000 villages.

Banks have been asked by the regulator to revise its own KYC norms accordingly. Bankers believe it is a welcome move but may pose some initial operational hurdles.

Source: Business Standard (link opens in a new window)

financial inclusion