After successfully implementing common KYC (know your customer) framework for the capital market, the Securities and Exchange Board of India (Sebi) has embarked upon an ambitious new project which will enable investors open a trading account sitting at home.
According to sources, the market regulator plans to introduce an electronic or e-KYC which will provide an option of conducting in-person verification (IPV) through use of webcams. The e-KYC process will further streamline and simplify the existing process. A senior Sebi official the e-KYC guidelines will be ready in next two months.
The new system is also aimed reducing the costs and expediting the process of account openings. Industry officials say a simplified KYC process has the potential of getting more people into capital market fold.
Currently, the IPV has to be done physically, whereby an investor has to visit an intermediary or a representative is sent to the client. Market players say the current framework allows online IPV, however, is not offered by brokerages due to lack of clarity.
"Technically, e-verification is allowed but what we need clarity from the regulator is on the procedure and the manner in which this can be conducted. Once that is smoothened out, then the entire digitization process can be complete," said B Gopkumar, head-broking, Kotak Securities.
Completing KYC formalities is mandatory for an investor for transacting in the securities market. Earlier, an investor had to go through the entire KYC process again while transacting with a new intermediary. For instance, an investor of HDFC Mutual Fund had to do the KYC process again while investing in Reliance Mutual Fund. In 2012, Sebi introduced the concept of centralised KYC, under which an investor had to do KYC just once with any of the stock market intermediary—either a brokerage or a fund house. The centralized KYC process is handled by Sebi-registered KYC registration agency, or KRA, who manage the KYC process on account of a stock market intermediary. The e-KYC process will be implemented through KRAs.
Sources said the regulator wants to put in place more checks and balances to ensure the e-KYC process is not manipulated by investors.
e-KYC is also expected to bring down the cost of acquisition for brokers and the time taken to open an account. Currently, the cost of turning around a lead or acquiring a new customer for most brokerages ranges from Rs 10,000-12,000 for large brokerages or about Rs7,000-8,000 for smaller ones. This could come down to as much Rs 4,000-5,000 once the process moves online. Similarly, the time taken to complete the KYC process online could reduce to 1-2 days from 8-10 earlier.
No comments:
Post a Comment