You may have come across many advertisements claiming to offer customers online fixed deposit (FD) account opening. Is this possible? Banks have always insisted on a physical know-your-customer (KYC), so how does this system of online account opening for fixed deposits work?

Here, we look into specific cases where online account opening for FDs is possible.

KYC regulations

As per the Reserve Bank of India’s ‘Know your Customer (KYC) Direction, 2016’, all banks, including commercial, rural, co-operative banks and non-banking finance companies (NBFCs), should go through the customer due diligence (CDD) process to open a new account. CDD involves collecting documents including identity and address proof, a recent photograph and permanent account number (PAN).

Further, physical verification of the address proof and personal presence of a customer are required to complete the CDD process by a bank. Even if you opt for the KYC to be e-validated using the Aadhaar number, in-person verification is a must. Thus, a customer has to visit a bank branch to open an account, including for an FD.

However, note that above conditions are relaxed in certain cases.

The RBI allows non-face-to-face customers to open bank accounts provided there is OTP-based e-KYC validation. However, the aggregate balance of all the deposits in such accounts shall not exceed ₹1 lakh.

Also, the aggregate of all credits in a financial year, in all the deposit accounts of the customer, shall not exceed ₹2 lakh. In case, the balance exceeds the threshold, the account shall cease to be operational.

Besides, for such deposit accounts, CDD, as mentioned earlier, should be done within a year for the account to be active.

Only a few banks in India provide non-face-to-face account opening option.

Ujjivan Small Finance Bank is one such lender that allows customers to open a savings or an FD account completely online.

Go online

What if you want to open an online FD account without monetary restrictions?

This is possible when you have a savings bank account in the bank in which you want to start an FD. As the CDD would have already been completed while opening the savings account, banks allow customers to open an FD online using net or mobile banking applications. Note that bank FDs that are opened online too are governed under the Deposit Insurance and Credit Guarantee Corporation (DICGC). That means, the aggregate of principal and interest amount in your deposit account would be insured to an extent of ₹1 lakh.

Once a customer signs up for mobile banking, he can also invest in other products of the bank, including tax saving plans, senior citizen schemes, recurring or variable RDs and money multiplier schemes, online. There is also an option to submit the nomination form, Form 15 G (request for non-deduction of TDS) too, online. To make the opening of FD accounts easier, some banks have now come up with innovative ideas. For example, ICICI Bank allows its customers to open an FD account by just sending a direct message (OTP secured) on its twitter page.

Banks which do not want to lose a customer on account of not having a savings bank account, woo them by making the savings or FD account opening process simpler by sending their representatives to the customer’s location to collect all the required documents and complete the in-person verification. Banks, including Jana SFB, Equitas SFB and a few other private players offer this facility. Most of the FDs opened online are also auto renewed after maturity at an interest rate applicable on that date.

Corporate FDs

Investment in most of the corporate FDs — usually they offer higher rates of interest — can be done online. This neither requires a personal verification nor an in-person submission of application/documents.

NBFCs or corporates issuing FDs usually depend on the verification done by third parties such as banks, which is allowed by RBI. Thus, in addition to regular KYC documents, corporates/NBFCs also ask for a cancelled cheque from the customer for opening a deposit account. Be aware that despite the ease of opening an FD account, non-bank FDs usually carry higher risks as there is no insurance backing.

Related Topics
comment COMMENT NOW