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KYC for opening accounts of proprietary concerns: Relaxation in requirement of documents

In case of opening accounts of proprietorship concerns, apart from customer identification procedure as applicable to the proprietor, banks and financial institutions call for and verify the activity proof of the concern. The default rule under KYC is that any two documents, out of following documents listed in paragraph 2.5(h) of RBI Master Circular should be provided as activity proof.

Registration certificate (in the case of a registered concern),  Certificate/licence issued by the Municipal authorities under Shop & Establishment Act, Sales and income tax returns,  CST/VAT certificate,  Certificate/registration document issued by Sales Tax/Service Tax/Professional Tax authorities,  Licence issued by the Registering authority like Certificate of Practice issued by Institute of Chartered Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries of India, Indian Medical Council, Food and Drug Control Authorities, etc.

RBI on review of requirements of furnishing two documents in respect of activity of the proprietary concerns relaxed the rule with a view to ease the process of opening accounts. RBI said that where the banks are satisfied that it is not possible to furnish two documents, they would have discretion to accept only one of the above activities proof. However in such cases the banks need to undertake contact point verification and collect such information as would be required to establish the existence of such firm, confirm, clarify and satisfy themselves that the business activities has been verified from the address of the proprietary concern.

In its circular dated 13.03.2015 RBI notified all the Commercial Banks that they may revise their KYC policy in the light above instructions. It is also clarified by the central bank that the list of registering authorities indicated in its Master Circular is only illustrative and therefore includes licence/certificate of practice issued in the proprietary concern by any professional body incorporated under statute, as one of the documents to prove the activity of the proprietary concern.

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