Recognising the importance of Know Your Customer (KYC), depositories now ask all Demat account holders to complete their KYC process. But what does KYC mean?

KYC is simply the process of confirming a customer's identity to ensure they are genuine or legitimate. This helps promote transparency and prevent illegal activities. Updating KYC details is now a must to keep trading or investing with a Demat account.

Every stock market transaction is linked to your PAN Card and bank account. KYC helps spot any gaps in your financial records, as it enables tracking of all funds flowing in and out of your Demat account. This has significantly reduced illegal trading, as each transaction is documented, making it easier to identify fraudulent activities. KYC plays an important role in keeping the stock market secure from fraudulent behaviour, illegal funding, black money, and other unlawful practices.

Also read: Difference between Demat and trading account

KYC is a mandatory process that all Demat and trading account holders must complete to continue buying, selling, and transferring shares. A failure to comply with this KYC requirement will result in the Demat account becoming inactive, preventing the account holder from executing any transactions.
 

Here is a quick guide to updating your KYC for a Demat account online:
 

Step 1: Log in to your online trading platform.

Step 2: Find the “Update KYC” option, section, or page. Click to access the KYC form.

Step 3: Review the information you provided during registration or account setup, including your full name, residential and commercial addresses, account nomination, and joint account holder details. Make any necessary updates.

Step 4: Upload a government-issued ID such as your Aadhaar Card, passport, voter ID, driving license, or PAN Card. Additionally, submit address proof, which could be your Aadhaar Card, passport, voter ID, driving license, or a recent utility bill (electricity, water, etc.).

Step 5: Provide a copy of a cancelled cheque with your name clearly printed to confirm your name, IFSC code, and account details.

Step 6: Use your phone's camera or computer’s webcam to complete the in-person verification.

1. Document inconsistencies: Minor errors, such as mismatches in names across different documents, can delay the KYC process. It's crucial to ensure your name is consistent on all documents and rectify any discrepancies promptly.
2. Number linking: For e-KYC and video-KYC processes, your mobile number must be linked to your Aadhaar Card. If your number isn't updated or linked, it can hinder OTP-based verification. Ensure you use a high-quality device for smooth authentication and visit an Aadhaar Seva Kendra if you need to update your mobile number.
3. Quality of document copies: While digital copies of documents can be used for e-KYC, having up-to-date, clear soft copies is essential. Download and save digital versions of key documents like your Aadhaar and PAN cards to avoid delays.
4. Linking PAN and Aadhaar: As per Section 139AA of the Income Tax Act, linking your PAN with Aadhaar is mandatory. Failure to do so can render your PAN inoperative and may result in fines, affecting your ability to complete financial transactions smoothly.

Below is a list of valid KYC documents that need to be submitted to the relevant authorities to complete the KYC process:
 

Proof of identity (Provide any one of the following):

• Aadhaar Card

• Passport

• Driving License

• Voter ID

• PAN Card

• Photo ID cards issued by Central or State Government bodies, public financial institutions, or public sector undertakings
   

Proof of address (Provide any one of the following):

• Voter ID

• Driving License

• Passport

• Utility bills such as water, electricity, gas, or telephone bill (dated within the last month)

• Ration Card

• Rental Agreement

• Sale Deed

• Passbook or bank statement showing the address

Typically, the KYC process for a Demat account takes up to seven days to complete using the standard verification method. However, if you choose the Aadhaar-based biometric authentication option, the process can be faster. This method combines online steps with minimal in-person requirements, significantly reducing the overall time needed for verification. If all your documents are in order, and you opt for the online mode, the account can be opened in a few hours.
 

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