Mumbai: To address problems faced by Self Help Groups during opening of savings bank accounts and credit linking, the RBI on Wednesday simplified KYC norms for them by stating that verification of all SHG members is not required.
"KYC verification of all the members of SHG need not be done while opening the savings bank account of the SHG and KYC (Know Your Customer) verification of all the office bearers would suffice," RBI said in a notification.
As regards KYC verification at the time of credit linking of SHGs, RBI clarified that since KYC would have already been verified while opening the savings bank account and the account continues to be in operation and is to be used for credit linkage, no separate KYC verification of the members or office bearers is necessary.
RBI said KYC norms have been simplified to address the difficulties faced by Self Help Groups (SHGs) in complying with KYC norms while opening savings bank accounts and credit linking of their accounts.
It further directed banks to revise their KYC policy in the light of said instructions and "ensure strict adherence to the same."
The KYC guidelines have been formulated to protect the financial system against threat of money laundering/terror financing and frauds.
However, some of the provisions made in this regard and their implementation by banks have led to avoidable inconvenience to public and has hindered efforts of financial inclusion.