KYC is the acronym for know your customer which refers to the due diligence which is taken by the banks and financial institutions so as to check credentials of the customer of the bank. In other words it is carried out in order to establish the identity of the person who has come for opening a new account with the bank.
Know your customer or KYC procedure should be the key principle for identification of an individual or a corporate while opening an account with the bank. It can be done in 2 ways –
1. Either through an introductory reference from an existing account holder or a person known to the bank.
2. On the basis of the documents provided by the customer and then checking on the documents to see whether they are in accordance with that of the guidelines issued by the central bank of the country.
KYC does not end with the opening of a new bank account; rather it is a continuous process of monitoring of the transactions done by the customer of the bank. Therefore bank should follow know your customer norms carefully so that bank does not have to suffer later on due to non compliance of KYC norms.