Instant Personal Loan: Why is KYC verification important for quick approval? | Mint

As the Indian economy evolves and we witness technological transformations it is natural to see the increased used of internet and aligned digital services to make lasting improvements in the lives of individuals.

These developments help in making the process of distributing short-term loans, instant personal loans among other associated services seamless. 

KYC hence is nothing but a means for banks and other lending institutions to ‘know their customers’. Now when this process is carried out in a digital manner i.e., through internet, in a paperless way we term the process as e-KYC.

What is e-KYC?

E-KYC is nothing but the collection of information by a bank or any other lending institution to authenticate a borrowers credentials.

It is a digital way through which important personal information and identity details are securely shared with a bank or lending institution in a paperless way. This process helps in making the distribution of services like instant personal loans, debit cards, credit cards among other related things easier and transparent. 

The norm here is that once the process of e-KYC is initiated a one time password (OTP) is sent on the customers Aadhaar linked mobile number.

Banks and other lending institutions use eKYC to onboard customers for a range of services such as banking, demat opening, applying for loans among other related things.

Role of KYC for instant personal loans

Enhanced risk mitigation, certainty: KYC helps in checking and cross-verifying customers, thus reducing the chances of identity theft, fraud, and other associated financial offences. Hence, KYC helps in boosting security and keeping data safe.

Due diligence with regulatory requirements: KYC procedures are mandated by regulatory authorities to ensure minimal human to human interference in data verification.

This further helps in combating money laundering, terrorist financing, and other associated illicit activities. Banks need to follow established regulations as set by regulatory organizations like RBI, SEBI etc., in this regard to ensure due diligence and distribute loans, instant personal loans and associated services seamlessly. 

Fostering trust, accountability and credibility: Solid KYC procedures help in building trust and credibility between banks and their customers. They bring uniformity in the collection of data and conducting background checks. This process hence enhances the faith of customers in the banking system.

Role of KYC in preventing financial crimes and protection of data

It is hence important to acknowledge that banks which provide seamless KYC ensure that customers are protected from identity thefts, data breaches and associated fraudulent activities.

This process also helps in ensuring money laundering detection easily as banks following the data track down the ultimate beneficiary of funds. Apart from maintaining compliance with anti-money laundering this process also protects the financial system from being exploited for illegitimate purposes. 

(Note: Raising a loan comes with its own risks. So, due caution is advised)