Banks undertake this exercise to verify the identity of their customers. The KYC exercise aims too prevent banks from being used, intentionally or unintentionally by criminal elements, for money laundering.  

KYC is applicable to every individual who wants to have any business relationship with the bank.  

This means any individual wanting to open an account (saving s or current account and recurring or fixed deposit), get a bank draft, open a locker, receive any benefits on account of financial transactions, remittance or wire transfer, and apply for a loan. 

The KYC norm has been validated under Section 35A of the Banking Regulation Act 1949, and Rule 7 of the Prevention of Money-Laundering Rules 2005. 

Any violation of these norms could attract severe penalty under the BR Act. 

KYC has two components: identity and address. While PAN and voter card, driving license and any other identity document that satisfies the banks requirements serve as proof of identity, a copy of passport, electricity or phone bill or bank account statement are accepted as proof of address.