The Hindu Business Line : Know your customer, don't suspect him

When I first heard of this new term KYC or `Know Your Customer' policy in the financial circles, I thought that here at last was an example of how even public sector banks were going to realise the real value of their customer, who kept them in business, the individuals who entrusted their salaries and savings to them.

So, here was one example of competition bringing into focus the human face of market-economy, and banks would now understand their customers better so they could serve them better offering them more relevant products and services.

Little did I know that words could mean such different things to different people.

Getting into details

What regulatory authorities such as the Securities and Exchange Board of India and the Reserve Bank of India had in mind was far from banks keeping trust with the customer and enjoying his trust in return. It was rather to pry further into his private life, and ask him to register under yet another law to get a distinctive identity number in order that they could track black money and prevent money laundering. Big Brother was going to watch more closely, from now on!

Obviously, the identity number for Income-Tax purposes and all the proofs with and without photographs hitherto asked for (driving licence, passport, and ration card) had not given the authorities enough of a handle to look into one's affairs.

Now, one more number had to be added — just to make sure we were not bringing in black money, converting it into a state of respectability.

Meanwhile, it is a public secret admitted in all sorts of forums and official committee reports that the parallel economy continues to flourish; and a class of powerful people continues to evade tax, while others pay their dues regularly, often unknowingly, via various deductions at source.

Getting way scot-free

Naturally, the average citizen suspects that the unscrupulous get away scot-free, year after year — this, despite pious pronouncements around budget time about simplified procedures and lower tax rates, and very liberal foreign exchange rules being meant as incentives to honesty.

So, he can be forgiven for wondering in what respect an additional number is going to strengthen the hands of the government.

After all, as the Finance Minister said while introducing the cash withdrawal levy two years ago, he knew well what skulduggery was going on, who the culprits were. The implication was that the authorities could move in anytime they chose to. Yet, there has been no visible evidence of this.

Reaching out to the customer

Meanwhile, the small investors in the stock market or mutual funds, who represent the majority, continue to be perplexed and harassed by the brave new world of modern finance, with its own peculiar language. It would indeed be a good idea, if the banks and mutual funds really knew their customer for a practical, and customer-friendly purpose and helped them plan and make their investments wisely.

Their methods can be made simpler, officers less inaccessible, and forms less cumbersome, requiring a lawyer to interpret them.

S Ramachander

More Stories on : Stock Markets | Insight | Jottings

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
The coming drought

NSE gets a global flavour

Should not judiciary be like Caesar's wife?

The `overheating' debate

Getting ready for Davos 2007

No future for India-Asean FTA

Know your customer, don't suspect him