Uploading of KYC data with Central Registry may miss September deadline

The government’s move to mandate CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest of India) to be the sole repository of KYC (Know Your Customer) information related to financial sector regulators is likely to overshoot its September deadline.

Those in the know say uploading of existing KYC records (those prior to July 15, 2016) would take a longer time.

A senior banker well-versed with developments on the CERSAI front, said: “Some banks are ready with their systems to upload the KYC data with CERSAI while others are not. Data structures have to be compliant with the CERSAI format and software vendors have to create interface with the banks’ systems.

“The government had asked banks (public sector) to complete the uploading of KYC data of even existing account-holders by September. However, banks have conveyed to the government that this is an onerous task and can be completed only next year.”

As on March 2015, RBI data reveal there were over 172 crore accounts (deposits + credit). In addition, there are crores of insurance policies, pension accounts, demat accounts and mutual fund folios to be uploaded.

All financial sector regulators have, in separate circulars, directed the entities they oversee — banks, securities market intermediaries, insurers and the like — to upload KYC data related to new accounts in CERSAI’s format.

Experts say issues related to uploading existing accounts need to be taken care of as a first step towards implementing single KYC and eventually a single demat account.

Tejesh Chitlangi, Partner IC Legal, said: “The central KYC system is the prerequisite to the long-standing need for a single demat account for all financial products. Also, from a practical perspective, it needs to be appreciated that the KYC requirements for a person opening a bank account and a person wanting to deal in securities/complex financial products may not be the same.

“Furthermore, the financial intermediaries may find it practically difficult to approach the existing set of clients to again seek their KYC as is required under various circulars, that too, in a very short span of time.

“The regulators and the financial institutions will have to be first geared up by clearing the current bottlenecks in the implementation of the central KYC system and be on the same page so that the single demat account scenario for all financial transactions may also see light of the day.”

There are concerns among KYC registration agencies (regulated by SEBI) on whether their KYC would be accepted by banks, insurers and pension funds.

“The premise of giving the mandate of common KYC registry (CKYCR) to CERSAI was that bank KYC would be treated as the primary KYC for any individual and other entities — such as fund houses, MFs, brokers, insurers and the like — would rely on that KYC.

“However, we have been asked to upload data with CERSAI. Now it is a question mark whether banks/insurers and pension funds will accept our KYC,” said a senior official of a KYC registration agency (KRA).

“The national customer identification number given by a bank to its customer will help him/her open an account with any other bank or open a demat account without having to go through the hassle of KYC documentation all over again.

“However, if the first bank gets the KYC data wrong, then it will have implications for other financial intermediaries who will use the same KYC,” a senior banker said.