Reetu Sharma :!3 June 2014
The Reserve Bank of India has come to the rescue of all those who face roadblocks while opening a bank account due to lack of ‘address proof’.
Relieving migrant workers and employees with transferable jobs who find themselves having to face harrowing procedures to access banking services, the RBI on Monday said that a bank account can now be opened with just one address proof, which can be either permanent or local.
Freedom from ‘address proof’
The move, which will also benefit millions living in rented accommodations, came in the form of a notification issued by the RBI, said, “Henceforth, customers may submit only one documentary proof of address (either current or permanent) while opening a bank account or while undergoing periodic updation. In case the address submitted changes, fresh proof of address may be submitted to the branch within a period of six months.”
This means that now a person from any State — say Delhi — can open a bank account without going through bureaucratic hassles even in Andhra Pradesh using the address proof of his home State.
Simplifying the Know Your Customer (KYC) norms for opening accounts, the Central bank also said, “In case the proof of address furnished by the customer is not the local address or address where the customer is currently residing, the bank may take a declaration of the local address on which all correspondence will be made by the bank with the customer. No proof is required to be submitted for such address for correspondence/local address. This address may be verified by the bank through ‘positive confirmation’ such as acknowledgment of receipt of (i) letter, cheque books, ATM cards; (ii) telephonic conversation; (iii) visits; etc.”
The RBI added, “In the event of change in this address due to relocation or any other reason, customers may intimate the new address for correspondence to the bank within two weeks of such a change.”
The story so far…
Till now, all customers who wanted to open a bank account had to submit an identity proof (PAN card, voter’s ID, driving licence or any other identity), along with utility bills (electricity bill) which acted as an address proof. The banks used to insist on address proof of the place where the customer is residing. The entire process, needless to say, was a big source of hassle for customers.
Ashish Kumar, who works in an outsourcing firm, told Niti Central, “I could not open my bank account in Delhi because I didn’t have a permanent address in the city. The Bank did not open my bank account and I had to face a lot of problems. For every single grievance, I had to either go to my native place or take help of my friends living in Delhi, who had their accounts here. Now finally, I will be able to open an account in this city.”
But why this change now?
Explaining the rationale behind the move, the notification said, “Reserve Bank has been receiving representations/references from various quarters, especially migrant workers, transferred employees etc. regarding problems faced in submitting a proof of current/permanent address while opening a bank account. The matter has since been examined in the light of amendment to the Prevention of Money Laundering Rules (Maintenance of Records), 2005, and accordingly it has been decided to simplify the requirement of submission of proof of address.”
This simplification of procedure to open an account will specially help those who face difficulty in doing so in the cities where they work.
As the process becomes more user-friendly, the number of account-holders is likely to increase because the complex process till now has been a barrier to entry.
In the opinion of officials
Earlier, even Reserve Bank Governor Raghuram Rajan had emphasised the need to make KYC norms less bureaucratic as a big chunk of Indian population still doesn’t have access to banking.
Speaking at the 10th convocation of the National Institute of Bank Management in Pune, Rajan said, “It is a shame that so many people in our country don’t have access to banking. Can we do this (KYC) better (without) compromising on security, while allowing ease of access? That is something we need to think about. We have to be innovative.”
A Business Standard report from last year says, “In a study done by Crisil, just one in two Indians has access to a savings bank account and just one in seven Indians has access to bank credit. There are merely 684 million savings bank accounts in the country with a population of 1.2 billion.”
RBI has taken this decision to ease the process of account opening and make the norms easier for customers. This will also help them achieve the goal of financial inclusion which is the top agenda of Indian finance in 2014.
Expressing a note of caution, RK Bansal, Executive Director of IDBI Bank was quoted byBusiness Standard as saying, “Though this is a step ahead in financial inclusion, it may pose some operational challenges initially for the banks. “Banks will have to be careful in verifying the permanent address. It will slightly increase the requirement of verification.”
