What are KYC and the need for furnishing KYC documents for FD for Senior Citizens?
Submission of KYC documents for FD for Senior Citizens for Proof of Identity (POI) and Proof of Address (POA) is mandatory for customers and clients who want to open a bank account or undertake a financial service like opening a D-MAT account or an insurance policy. The primary purpose of implementing stringent KYC policies by the Government, Reserve Bank of India, regulatory bodies, namely Securities & Exchange Board of India (SEBI) and Insurance Regulatory and Development Authority (IRDA), is to prevent money laundering, terrorist financing, financial fraud, evasion of taxes and identification of the customer/client. The following are the KYC documents that are the accepted “Officially Valid Document” (OVD) as per RBI circular:
- Passport,
- Driving license,
- Proof of possession of Aadhaar number,
- Voter’s Identity Card issued by the Election Commission of India,
- Job card issued by NREGA duly signed by an officer of the State Government, and
- Letter issued by the National Population Register containing details of name and address.
Apart from the above-listed documents, proprietorship firms/partnership firms/Hindu undivided family (HUF) and companies are required to give additional documents but not limited to the following:
- Trade License,
- Shop & Establishment registration certificate,
- Pan card of HUF, partnership firm, Company,
- Partnership Deed,
- Memorandum of Association,
- Articles of Association,
- Board Resolution/Power of Attorney authorizing the employees to sign documents,
- Identification of Ultimate Beneficial Owner (UBO).
These KYC documents are also required for Fixed deposits, failing, which can hinder the fixed deposit account opening process.
What is CKYC?
CKYC is the abbreviation for Central Know Your Customer for FD for Senior Citizens. It is a centralized repository that stores or saves all the customer’s details. Earlier, there was a separate KYC process for every financial entity. The Central Government launched CKYC. It helps to bring all the KYC processes on a single platform.
Hence, if verification of an investor’s Central KYC is complete, he is not required to go through the same process again. In case he desires to invest in some other financial institute. The data is then stored digitally in one central server and is accessible to all authorized financial entities. The financial institution can use the data as required.
Launched during the Union Budget of 2012-13, the Central Registry of Securitisation and Asset Reconstruction and Securities Interest of India (CERSAI) manages CKYC Registry. It commenced operation in July 2016.
Central KYC or CKYC is an initiative by the Government to bring the KYC process of all financial entities under a single window. CKYC norm requires all individual investors are to fulfil KYC requirements.
Different types of CKYC accounts
The CKYC accounts are classified into the following types of accounts:
Regular KYC account– In this type of account, the KYC submitted are among the 6 Officially Valid Documents (OVD) as per RBI.
Simplified or Low-Risk KYC Account– The customer cannot provide any document out of the 6 OVDs mentioned and marked ‘low risk’ by the reporting entities. However, they have to give any of the following:
- Proof of identity with photos issued by the state/central government departments, public sector undertakings (PSUs), statutory/regulatory authority, public financial institutions, and scheduled commercial banks.
- Letter with a duly attested photo of the person issued by a gazetted officer. Such types of accounts will have the prefix ‘L’ to them.
Small accounts– In these types of accounts, the customer is not holding any valid identity proof but can open the account by providing a self-attested photograph and signed application with the condition that they shall provide a valid proof of identity and address within a year or a proof of their application for a valid document. These accounts are prefixed with ‘S’ and can be operated with several restrictions on their withdrawals, account balance, and credits.
Features of CKYC
- CKYC number is a 14 digit number linked with the ID proof.
- The data is then safely stored in electronic format.
- The document submitted is then verified with the issuer
- All the concerned institutions are notified when there is a change in the KYC details.
As a senior citizen, you should look for investment options that offer high returns and security for your invested capital. Fixed income instruments are risk-free but they do not provide returns sufficient enough to enjoy a good life post-retirement.
On the contrary, market-linked instruments do offer lucrative returns but their performance depends on the market conditions. By keeping all these things in mind, we have brought some of the best investment schemes for senior citizens in 2020:
SCSS
SCSS i.e. Senior Citizen Savings Scheme is a small saving scheme provided by Post Offices and some select banks in India. The minimum deposit amount is Rs. 1000 and you can deposit up to Rs. 15 lakhs in SCSS. Its interest rate is revised every quarter but is usually a bit higher than regular savings schemes.
However, SCSS comes with a fixed tenor of 5 years and you can extend it for 3 more years after maturity. You can withdraw your deposits prematurely but the penalty charges will reduce your interest earnings to some extent.
POMIS
Post Office Monthly Investment Scheme (POMIS) is another scheme offered by the Post Office of India. The best part about this scheme is that it provides a monthly interest payout that you can use to cover your monthly expenses.
The minimum deposit amount is Rs. 1500 but you can invest only up to Rs. 4.5 lakhs in POMIS. It comes with a lock-in period of 5 years and early withdrawals are allowed only after completion of 1 year.
Bank deposits
Banks FD plans usually provide slightly higher fixed deposit rates for senior citizens. Here, you will get flexibility in tenor and other features that are not provided by small savings schemes.
However, since bank fixed deposit rates are currently low due to uncertain economic conditions, this additional interest rate benefit will hardly make much of a difference in returns.
Corporate FDs
Corporate FDs offer higher FD for Senior Citizens than bank FDs but for ensuring the security of deposits, you must invest in a corporate FD that has received high ratings for stability and safety.
Bajaj Finance FD is a company FD that has received the highest ratings by credit rating organizations like CRISIL and ICRA for securing the capital of the depositors. Moreover, it also provides an FD interest rate of up to 6.85% that is much higher than bank FDs and most small savings schemes.
An additional interest rate benefit of 0.25% is offered to senior citizens. This allows you to earn sufficient returns to secure your future. Also, monthly, quarterly, six-monthly, or yearly interest payouts can be used as a regular income source by investing in non-cumulative Bajaj Finance FD. In times of need, you can withdraw your deposits easily by paying a nominal penalty fee.
The provision of investing in an FD online by using an online FD form and cKYC process for document verification ensures that you take minimum effort for starting an FD.
The minimum deposit account is just Rs. 25000. Also, non-seniors can get a 0.10% additional interest rate by choosing the option of online investment.
Systematic Deposit Plan for FD for Senior Citizens
If you are not interested in investing a bulk amount, then you can think of a Systematic Deposit Plan from Bajaj Finance. In this scheme, you just have to deposit Rs. 5000 or more (as per your convenience) every month. The deposit count can range from 6 to 48 as per your financial obligations and each deposit will be considered to be a separate FD and will grow at the interest rate applicable on the date of deposit.
You can either choose one date on which all the deposits will mature or you can lock-in each deposit for a tenor of up to 60 months as per your convenience. SDP proves to be a useful instrument if you do not want to commit all your savings at once post-retirement.
As a senior citizen, you would like to secure your capital while earning higher interest gains. For that, you can invest in saving schemes like SCSS, POMIS, etc. However, their withdrawal policies are a bit strict and you will also end up paying a hefty penalty if you withdraw your deposits prematurely. As the bank FD rates in India have reduced this year, you can invest in a company FD like Bajaj Finance FD that provides a higher FD rate to senior citizens, easy withdrawal methods, and multiple interest payout options. If you are not keen on investing your entire savings at once then you can invest in its SDP to earn high returns by depositing a fixed amount every month.
Conclusion
CKYC registry helps financial entities skip the lengthy process of onboarding customers. They make all the relevant information about the customer available under the same window. It further helps in saving a lot of time and labour.