Personal Loan: What is the importance of KYC for instant loans? | Mint
Source: Live Mint
Have you ever wondered how a bank approves a personal loan within a few hours, sometimes within minutes, of applying? Is this because the bank knows you personally, or does the lender repose so much faith in you?
Well, it could be the case but there is a process that works in the background that allows the lender to authenticate a borrower’s profile. This process is known as eKYC (electronic process to Know Your Customer).
It is typically done via OTP (one time password) sent to the customer’s mobile phone linked to aadhaar.
Banks often use eKYC to onboard customers for a range of services such as banking and also to apply for loans, or reverify personal details.
How it works
1. At the outset, a customer gives his/her Aadhaar number and gives his/her consent to the service provider to access data.
2. After the consent is given, service providers can access the UIDAI (Unique Identification Authority of India) database.
3. It’s at the database, the service provider is authorised to verify the customer’s identity, address, and other demographic details.
4. Finally, customer’s details are securely stored
Since the entire process happens online via an SMS, it is instant and does not require the applicant to submit any documents such as address proof and others.
NPCI describes the entire process of e-KYC through these steps.
These are the steps
1. the KYC request is sent through specific communication protocol
2. It moves to HTTPs over secured leased line
3. Later, it moved to UIDAI’s central identities data repository.
4. Finally, the response is generated and demographic details are shared to deliver the services.
The entire KYC (Know Your Customer) process starts from aadhaar holder. It proceeds to authentication (either via biometrics and/or OTP). Then it moves to the KYC user agency followed by authentication service agency, before being approved.
It is recommended to citizens that they modify information such as their name and address, whenever the need arises in order to keep the information up-to-date.
