India planning single financial ID system to eliminate repetitive KYC checks from August: Report

Indian banks and insurers are set to launch a unified customer identification system in August, with asset managers and brokerages joining later, Reuters reported, citing sources familiar with the matter. 

The new framework, Central Know-Your-Customer 2.0 (CKYC 2.0), will eliminate the need for individuals to repeatedly submit identification documents whenever they open an account or access a new financial service, according to the report. Financial institutions will be able to retrieve verified customer data directly from a central repository, provided the customer grants permission via a one-time password (OTP). 

India has attempted to streamline customer verification for over a decade, maintaining a central database containing nearly 1.2 billion records. However, Reuters reported that widespread adoption was hampered by concerns over data quality, duplicate records, and incomplete information, leading regulators like the Reserve Bank of India (RBI) to routinely reject repository records and require fresh paperwork. 

The upgraded CKYC 2.0 system addresses these legacy issues by embedding a confidence score into every record to reflect data accuracy and show whether information has been verified, Reuters reported.

Regulators, including the RBI, the Securities and Exchange Board of India (SEBI), and the Insurance Regulatory and Development Authority of India (IRDAI), are working together on the initiative, which officials expect will also bolster fraud prevention by simplifying cross-sector oversight across the financial system.