At least four private sector lenders-- Kotak Mahindra Bank, IndusInd Bank, RBL Bank and IDFC First Bank -- have started using video for KYC, or know-your-customer procedures, in line with Reserve Bank of India regulations, to ramp up their savings account base amid the coronavirus lockdown.
Before the RBI allowed video-KYC, the lenders had sourced some accounts digitally, but were required to complete the KYC within 12 months. “The KYC was physical, and until it was completed, a customer could not hold more than ₹1 lakh balance," said Surinder Chawla, head, retail liabilities and wealth management, RBL Bank.
Kotak Mahindra Bank, for instance, started video-KYC for its Kotak 811 digital savings account. This facility, launched on a pilot basis, is expected to be extended to other products as well. Shanti Ekambaram, group president, consumer banking, Kotak Mahindra Bank, said both banks and customers need to adapt to a new normal in the aftermath of covid-19. The bank opened 14,000 Kotak 811 accounts every day during 1-12 May, and around 4.4 million in FY20.
Experts said post-covid-19, traditional banking, which heavily relied on branches to get deposits, is adapting to the reality that customers will not visit branches that often. Vivek Belgavi, partner and fintech leader, PwC, said both regulatory framework and technology solutions are evolving in tandem to allow the financial services industry to seamlessly onboard and deliver services to their customers. “Video KYC enablement and adoption is an example," Belgavi said, adding that all organisations will need to have a relook at customer onboarding and servicing, and see how they can mitigate health and compliance risks associated with contact, and be ready to report on compliance requirements.
Lenders are drawn by the lure of getting fresh deposits coming at an interest rate of 4% or even less. Banks in India rely extensively on flow of deposits to manage their cost of funds. As per RBL Bank’s disclosures to analysts on 7 May, it acquires 500 savings accounts per day digitally and expects to increase this to a 1,000 per day over the next three months. Its digitally-sourced deposits are now 65% of its retail deposits.
Amit Kumar, head, retail liabilities, IDFC First Bank, said: “The zero-contact method does away with paper work and biometric verification, removing physical interaction between the bank and customer from the KYC process."