What Are KYC Norms For Demat Account

If you are planning to enter the stock market, the first thing you need is a Demat account. To open a Demat account, you should know the Know Your Customer (KYC) norms that the Reserve Bank of India (RBI) issued in 2002 and the Securities and Exchange Board of India (SEBI) implemented for all investment-related activities.

What is the role of KYC?

KYC for the Demat account puts a halt on corrupt practices, such as money laundering, cash trading without audit trials, fraud, and using the money to sponsor anti-national activities. The Demat account KYC update is a one-time process, and the KYC data of the investor gets stored in the database. Banks and financial institutions can easily track the transactions of customers using their KYC. KYC is essential for all transactions related to mutual funds, Demat accounts, and trading accounts.

Why is KYC for Demat account opening important?

KYC for Demat accounts has enhanced the security of transactions. The customer needs to provide all documents related to KYC for opening a Demat account. It has made it easy for the authorities to keep a check on the funds that get credited or debited in the customer’s account. KYC also eliminates the scope of illegal activities. The authorities can view the customer’s financial data by entering his Permanent Account Number (PAN). The customer finds it easy to file taxes due to the KYC process as all his transactions are conveniently linked to the bank account and tax returns can be filed easily.

What is the process of e-KYC for a Demat account?

The online KYC for the Demat account is a quick and easy process. The Aadhar-based e-KYC process allows a customer to open a Demat and Trading account within minutes. Customers can complete the e-KYC process online, from the comforts of their homes.

  • The Aadhar-based e-KYC verification process is carried out using the customer’s Aadhar card which consists of their biometric information. Aadhaar is usually linked with the customer’s mobile number, where they receive the OTP and confirming the OTP simply completes the process.

Conclusion

The KYC process is mandatory as per the RBI and SEBI guidelines to open a Demat account. The KYC process makes transactions safer and puts control on fraudulent and illegal monetary activities. For KYC verification, you need to submit your KYC documents, including identity proof, address proof, PAN details, and bank account details.

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FAQs

You can get online KYC done for small transactions from a Demat account. For large transactions, you will also require an in-person KYC verification.

You can upload your KYC online using the Aadhaar card and submit an OTP received on the mobile number linked with the Aadhaar card.

You cannot open a Demat or Trading account without a KYC. SEBI has made KYC compulsory for opening a Demat and trading account.

Once you submit the KYC form online, you can check its status on the KYC Registration Agency (KRA) website. To check the status of your KYC, enter your PAN details. The complete information regarding the status of your KYC appears on the screen thereafter. If the KYC verification is done, it will show ‘verified by NDML’. If the verification is not complete, the status will show as pending. Simultaneously your stockbroker will also show the status of your KYC in real-time.

The documents you require for a KYC verification for Demat account are as given below:

  • Proof of identity
  • Proof of address
  • Bank account number
  • PAN details