UCIC and the Centralized KYC Registry: A Chicken and Egg Situation?
MNP (Mobile Number Portability) is currently allowed only within circles. But the Cabinet has recently cleared a proposal for full number portability - across operators, across states. Similarly, health insurance is portable.
In the mutual funds industry, KYC (Know Your Customer) compliance is portable. Provide all the relevant information and documents once, a KYC acknowledgment slip is all you will need for your next investment. In any scheme. From any mutual fund.
But banking, somehow, hasn't changed. There is still a good chance that KYC compliance is nontransferable within two branches of the same bank, forget different banks.
This stands to change if the RBI's proposal to introduce KYC portability ahead of account number portability becomes reality.
As a first step, the RBI has advised Urban Cooperative Banks to issue a Unique Customer Identification Code (UCIC) to all existing individual customers as well as to new ones by May 2013, and the plan is to subsequently implement the same across the entire banking industry. The intent also is to set up a centralized KYC registry that would play a role similar to, one presumes, CDSL Ventures in mutual funds.
The modalities of the effort aren't exactly clear as yet.
While each bank issues UCICs to their own customers, how are they collectively going to ensure there is no duplication of multiple account holders?
Wouldn't it be more practical to start with the registry? Which could then process the information uploaded by banks, cross-reference them, and issue UCICs without duplication?
Mutual funds are ported on the basis of the PAN card. In banking, Aadhaar will play that role. But until then, how will cross-referencing work if the same person has submitted two different documents to different banks?
There are many more questions that need to be addressed. And I think an exercise of this magnitude and significance could use some brainstorming. For instance:
Is there any information or interpretation that is missing and could be relevant?
Is there a perspective from another industry or country that could be adapted?
What should come first, the UCIC or the registry?
What are the other issues that need to be considered?
RBI directs banks to assign unique identification code to customers by May-end 2013 - http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=7606&Mode=0