The RBI recently allowed banks to use Video KYC to validate loans and credit card applications. Video KYC is another effective mechanism to accelerate application processes wherein customers can use their smartphone cameras to validate themselves before a bank-appointed officer.
The Covid-19 pandemic has changed almost everything that touches our lives, and these changes could become the new normal soon. In banking, customers are using digital channels for their day-to-day payment requirements. However, they still have to rely on offline processes to complete a host of other critical banking tasks, like opening an account, applying for a loan, etc. which involve meeting the bank, signing papers, filling forms and sharing physical documents.
The government, along with the Reserve Bank of India, has started taking a slew of measures to free up capital to be lent to customers and SMEs by the banks and NBFCs. But this extension of credit among other liquidity measures has to be delivered to the common people in a seamless and contactless manner. To do so, certain regulatory reforms pertaining to Know Your Customer (KYC) need to be pushed by RBI so that people can get the loans and avail other banking facilities from the comfort of their homes. This would require a few sweeping changes in the BFSI industry.
Allow voluntary use of Aadhaar OTP-based eKYC
Aadhaar is a rich database of critical information that helps validate your identity. However, only banks are allowed to use Aadhaar for customer validation for loans, credit cards and more. This happens through Aadhaar OTP-based e-KYC. Now, there’s a need to allow fintechs and NBFCs to allow customers to validate themselves with Aadhaar in a consent-based manner. The benefits: customers get their credit lines faster, banks cut processing time and costs, and the credit is disbursed to the customer in a contactless manner.
Enable greater use of C-KYC
The Central KYC (C-KYC) registry is a massive database of KYC records of customers across the financial sector. Its use needs to be widely enabled by the RBI. The benefits: service providers can access the database each time you want to open a new account, thus cutting down processing time and costs by speeding up your KYC process.
Larger loans through e-KYC
Today, you can take a loan up to Rs 60,000 through e-KYC. This cap needs to be raised. Credit cards still can’t be availed digitally. You’d have to go through an offline validation process. Therefore, credit cards, too, should be brought under the ambit of e-KYC account openings so customers can get credit lines safely from their homes. As people grapple with cash flow problems, there’s a great need for contactless, digital validation of customers, allowing them to take large loans or credit cards to go about their daily transactions.
The RBI recently allowed banks to use Video KYC to validate loans and credit card applications. Video KYC is another effective mechanism to accelerate application processes wherein customers can use their smartphone cameras to validate themselves before a bank-appointed officer. This wonderful new technology can be widely used through greater collaboration between banks and fintechs, which the RBI needs to sign off on.
The steps mentioned above if adopted, will not just ensure faster delivery of financial products in a safe, contactless and cost-effective manner but would also go a long way to secure true democratisation of financial products.
The author is CEO, BankBazaar.com