A PROJECT REPORT ON

A STUDY ON KYC IN ABHUDHYA BANK CUSTOMERS

SUBMITTED BY
ROHAN RAMESH ACHREKAR
T.Y.COM.BANKING AND INSURANCE V
2019-20

UNDER THE GUIDANCE OF

PROF.VIVEK GUPTA

SUBMITTED TO
UNIVERSITY OF MUMBAI

VIDYALANKAR SCHOOL OF INFORMATION TECHNOLOGY

(AFFILIATED TO UNIVERSITY OF MUMBAI)
VIDYALANKAR MARG, WADALA(E)
MUMBAI 400037

1
 VIDYALANKAR SCHOOL OF INFORMATION TECHNOLOGY
(Affiliated to Mumbai University)

Certificate
This is to certify that
Mr./Ms. ROHAN RAMESH ACHREKAR of B.Com. in Banking &
Insurance, Semester VI has undertaken & completed the
project work titled A STUDY ON KYC IN ABHYUADYA BANK
CUSTOMER during the academic year 2019-2020 under the
guidance of Mr./Ms. VIVEK GUPTA submitted on to this
college in fulfillment of the curriculum of B.Com. in Banking &
Insurance University of Mumbai.
This is a bonafide project work & the information
presented is True & original to the best of our knowledge and
belief.

PROJECT COURSE EXTERNAL PRINCIPAL

GUIDE CO-ORDINATOR EXAMINER

2
 ACKNOWLEDGMENT
I hereby acknowledge all those who directly or indirectly helped me in drafting of this
project report. It would not have been possible for me to complete the task without
their help and guidance.
First of all, would like to thank the Principal Dr. Rohini Kelkar and the Vice Principle
Prof. Vijay Gawde. And our project in-charge Prof. VIVEK GUPTA Who gave me
the opportunity to do this project work.
They also conveyed the important instructions from the university time to time.
Secondly, I am very much obliged of Prof. VIVEK GUPTA for giving guidance for
completing the project.
Last but not least; I am thankful to the University of Mumbai for offering the project in
the syllabus. I must mention my hearty gratitude towards my family other faculties
and friend who supported me to go ahead with the project.
 DECLARATION
Vidyalankar school of information Technology
(Affillated to University of Mumbai)
Vidyalankar Marg, Wadala(E),
Mumbai 400037
I ROHAN RAMESH ACHREKAR Student of T.Y.B.COM. Banking &
Insurance Semester VI, Vidyalankar School of Information
Technology, hereby declare that I have Completed the project
A study on kyc inabhyudaya bank customer academic year 2019-2020
The information Submitted is true and original to the best of my knowledge.

ROHAN RAMESH ACHREKAR

 Executive Summary

I had done the project to know your customer are aware the kyc norms. I
also want aware that type of banking Services are using as a
competitive. I had gone through the various website, newspaper, and
references to study what exactly the kyc banking is.The project highly
depend on the banking as career through the project Try to give all the
basic advance idea about the know your customer. The target this
project is not only to get information but to have an overview of the
changes that have taken palce in bank over the last few days because of
the improvement In technology. The project shows that various
formalities, rules, and regulations of Abhudhay bank.

SR.NO PAGE TITLE PAGE NO.

 1 Scope of the study 1
Ch.1 Introduction to the Study 2
1.1 Objective of the Study 2

1.2 Limitation of the Study 2

1.3 Research Methodology & Sources of Data 3
Ch.2 Review of Literature 4-9
Ch.3 Introduction to the Topic 10-58
Ch.4 Data Analysis & Interpretation of Data 59-72
Ch.5 Findings 73
Ch.6 Conclusion 74
Ch.7 Suggestions 75

8 Annexure 76-79
9 Bibliography 80
INDEX
 A STUDY ON KYC IN ABHYUDYA BANK CUSTOMER

Scope of study
The main objective of this report is to make customers filling their e-kyc details. In
this report Know Your Customer is the process of verifying the identity of customer.
The objective of KYC guidelines is to prevent banks from being used, by criminal
elements for money laundering activities. It also enables banks to understand its
customers and their financial dealings to serve them better and manage its risks
prudently.
 Ch.1 Introduction of the study

KYC is the process of a business verifying the identity of clients and assessing risks
of illegal intentions for the business relationship. This term is also used to refer the
bank regulations and anti-money laundering. KYC is an acronym for “Know your
Customer”, a term used for customer identification process. It involves making
reasonable efforts to determine true identity and beneficial ownership of accounts,
source of funds, the nature of customer’s business, reasonableness of operations in
the account in relation to the customer’s business, etc which in turn helps the banks
to manage their risks prudently. The objective of the KYC guidelines is to prevent
banks being used, intentionally or objective of the KYC guidelines is to prevent
banks being used, intentionally or unintentionally by criminal elements for money
laundering. KYC procedures also enable banks to know/understand their customers
and their financial dealings better which in turn help them manage their risks
prudently.

1.1 Objectives of study

 To know the usefulness of kyc to for customers
 To understand the problem faced by customers in filling E-kyc
 To know the KYC procedure adopted by the bank.
 To know willingness of customers in using kyc by bank.
 To study awareness about kyc among in customer.

1.2 limitations of study

1. Research is based on the information provided by the customer.

2. The study covers individuals only and does not cover households and
firms.

3. The study covers secondary data pertaining to the Scheduled

Commercial banks

4. The Study is limited for the abhudhya bank customer.

5. The study suffers from dearth of published information on urban
Financial Inclusion.
1.3 Research methodology

Primary data:
Primary data has collected directly from customers through structured
questionnaires (individual sample units)
Secondary data:
Secondary data has collected from the various magazines, journals, website, of
Abhyudaya bank and various websites.
Sampling method:
The population includes male and female customers residing in the area of Mumbai
with the criteria: customers with Abhyudaya bank .in this project convenience
sampling method is followed.
HISTORY OF BANKING

The Reserve Bank of India (RBI), as the central bank of the country, closely monitors
developments in the whole financial sector.
The Banking sector is dominated by Scheduled Commercial Banks (SBCs).as at end
- March 2002, there were 296 Commercial banks operating in India. This included 27
Public Sector Banks (PSBs), 31 Private ,42 Foreign and 196 Regional Rural Banks.
Also, there were 67 scheduled co-operative banks and 16 scheduled state co-
operative banks.
Scheduled commercial banks touched, on the deposit front, a growth of 14% as
against 18% registered in the previous year. and on advances, the growth was
14.5% against 17.3% of the earlier year.
State Banks of India is still the Largest bank in India with the market share of 20%
ICICI and its two subsidiaries merged with ICICI Banks, leading creating the second
largest bank in India with a balance sheet size of Rs. 1040bn.
Higher provisioning norms, tighter asset classification norms, dispensing with the
concept of ‘Past due’ for recognition of NPAs, lowering of ceiling on exposure to a
single borrower and group exposure etc., are among the measures in order to
improve the banking sector.
A minimum stipulated Capital Adequacy Ratio (CAR) was introduced to strengthen
the ability of banks to absorb losses and the ratio has subsequently been raised from
8% to 9%. It is proposed to hike the CAR to 12% by 2004 based on the Basle
Committee recommendations.
Retail banking is the new mantra in the banking sector. The home loans alone
account for nearly two-third of the total retail portfolio of the bank. According to one
estimate, the retail segment is expected to grow at 30-40% in the coming years.
Net banking, phone banking, mobile banking , ATMs and bill payments are the new
buzz words that banks are using to lure customers.
With a view to provide an institutional mechanism for sharing of information on
borrowers/potential borrowers by banks and financial institution, the credit
information bureau (India) Ltd. (CIBIL) was set up in august 2000. The bureau
provides a framework for collecting, processing, and sharing credit information on
borrowers of credit institutions. SBI and HDFC are the promoters of the CIBIL.
The RBI is now planning to transfer of its stakes in the SBI, NHB and national bank
for agricultural and rural development to the private players. Also, the government
has sought to lower its holding in PSBs to a minimum of 33% of total capital by
allowing them to raise capital from the market.
Banks are free to acquire share, convertible debentures of corporate and units of
equity-oriented mutual funds, subject to a ceiling of 5% of the total outstanding
advances (including commercial paper) as on march 31 of the previous year.
The finance ministry spelt out structure of the government-sponsored ARC called the
asset reconstruction company (India) limited (ARCIL),this pilot project of the ministry
would pave way for smoother functioning of the credit market in the country. The
government will hold 49% stake and private players will hold the rest 51% the
majority being held by ICIC bank (24.5%).
BANKING SYSTEM IN INDIA

In India the banks and banking have been divided in different groups. Each group
has their own benefits and limitations in their operations. They have their own
dedicated target market. Some are concentrated their work in rural sector while
others in both rural as well as urban. Most of them are only catering in cities and
major towns.

The banking system of India consists of the central bank (Reserve Bank of India -

RBI), commercial banks, cooperative banks and development banks (development
finance institutions). These institutions, which provide a meeting ground for the
savers and the investors, form the core of India’s financial sector. Through
mobilization of resources and their better allocation, banks play an important role in
the development process of underdeveloped countries.
The banking system plays an important role in promoting economic growth not only
by channeling savings into investments but also by improving allocative efficiency of
resources. The recent empirical evidence, in fact, suggests that banking system
contributes to economic growth more by improving the allocative efficiency of
resources than by channeling of resources from savers to investors. An efficient
banking system is now regarded as a necessary pre-condition for growth.

The banking system of India consists of the central bank (Reserve Bank of India

- RBI), commercial banks, cooperative banks and development banks (development
finance institutions). These institutions, which provide a meeting ground for the
savers and the investors, form the core of India’s financial sector. Through
mobilization of resources and their better allocation, banks play an important role in
the development process of underdeveloped countries.
BANKING DEVELOPMENT AND NATIONALIZATION OF
BANKS IN INDIA

Banking development in India has been, by and large, a state-induced activity. The
Reserve Bank of India was nationalized in 1949 followed by the nationalization
of Imperial Bank of India (now the State Bank of India - SBI) in 1955. In 1969, 14
major commercial banks were nationalized and the exercise was repeated when 6
more commercial banks were nationalized in 1980. Thus, prior to economic reforms
initiated in early 1990s, banking business in India was a near-monopoly of
the Government of India.

The underlying philosophy of this approach was to encourage growth, via availability
of adequate credit at reasonable/concessional rates of interest, in areas where
commercial considerations did not allow for disbursal of credit.

THE FINANCIAL SECTOR IN INDIA

Along with the rest of the economy and perhaps even more than the rest, financial
markets in India have witnessed a fundamental transformation in the years since
liberalization. The going has not been smooth all along but the overall effects have
been largely positive.

Nationalization of commercial banks was a mixed blessing. After nationalization

there was a shift of emphasis from industry to agriculture. The country witnessed
rapid expansion in bank branches, even in rural areas. However, bank
nationalization created its own problems like excessive bureaucratization, red-tapism
and disruptive tactics of trade unions of bank employees. It was in this backdrop that
wide-ranging banking sector reforms were introduced as an integral part of the
economic reforms programme started in early 1990s and which is still under way.

The Indian banking sector has witnessed wide ranging changes under the influence
of the financial sector reforms initiated during the early 1990s. The approach to such
reforms in India has been one of gradual and non-disruptive progress through a
consultative process. The emphasis has been on deregulation and opening up the
banking sector to market forces. The Reserve Bank has been consistently working
towards the establishment of an enabling regulatory framework with prompt and
effective supervision as well as the development of technological and institutional
infrastructure.

Persistent efforts have been made towards adoption of international benchmarks as

appropriate to Indian conditions. While certain changes in the legal infrastructure are
yet to be effected, the developments so far have brought the Indian financial system
closer to global standards.

Private banks are today increasingly displacing nationalized banks from their
positions of pre-eminence. Though the nationalized State Bank of India
(SBI) remains the largest bank in the country by far, private banks like ICICI Bank,
Axis Bank and HDFC Bank have emerged as important players in the retail banking
sector. Though spawned by government-backed financial institutions in each case,
they are profit-driven professional enterprises.

STRUCTURE OF BANKING SYSTEM IN INDIA

Banks can generally be classified into various sub-categories as follows:

PUBLIC SECTOR BANKS IN INDIA

o The State Bank Group and Nationalized banks: Is a group of 27 banks

o Has the largest number of branches in metro/ urban/rural areas

throughout the country

o Contributes to about 75% of the total deposits

o Contributes about 70% of total advances of all commercial banks in

India.
 o Most have a very large branch network spread over all parts of the
country

o Have a Large deposits and assets base

o Perform all kinds of core and modern banking functions

SCHEDULED BANKS:
These are banks which are listed in the second schedule of the Reserve Bank of
India Act, 1934

o These banks are required to maintain certain amounts with RBI and, in
return, they enjoy the facility of financial accommodation and
remittance facilities at concessionary rates from RBI

o State Co-operative Banks

o Commercial Bank
Reserve Bank of India (RBI)

The country had no central bank prior to the establishment of the RBI. The RBI is the
supreme monetary and banking authority in the country and controls the banking
system in India. It is called the Reserve Bank’ as it keeps the reserves of all
commercial banks.
Scheduled & Non –scheduled Banks
A scheduled bank is a bank that is listed under the second schedule of the RBI Act,
1934. In order to be included under this schedule of the RBI Act, banks have to fulfil
certain conditions such as having a paid-up capital and reserves of at least 0.5
million and satisfying the Reserve Bank that its affairs are not being conducted in a
manner prejudicial to the interests of its depositors. Scheduled banks are further
classified into commercial and cooperative banks. Non- scheduled banks are those
which are not included in the second schedule of the RBI Act, 1934. At present these
are only three such banks in the country.
Commercial Banks
Commercial banks may be defined as, any banking organization that deals with the
deposits and loans of business organizations. Commercial banks issue bank checks
and drafts, as well as accept money on term deposits.  Commercial banks also act
as moneylenders, by way of instalment loans and overdrafts. Commercial banks also
allow for a variety of deposit accounts, such as checking, savings, and time deposit.
These institutions are run to make a profit and owned by a group of individuals.
Scheduled Commercial Banks (SCBs):
Scheduled commercial banks (SCBs) account for a major proportion of the business
of the scheduled banks. SCBs in India are categorized into the five groups based on
their ownership and/or their nature of operations. State Bank of India and its six
associates (excluding State Bank of Saurashtra, which has been merged with the
SBI with effect from August 13, 2008) are recognised as a separate category of
SCBs, because of the distinct statutes (SBI Act, 1955 and SBI Subsidiary Banks Act,
1959) that govern them. Nationalised banks  and SBI and associates  together form
the public sector banks group IDBI ltd. has been included in the nationalised banks
group since December 2004. Private sector banks include the old private sector
banks and the new generation private sector banks- which were incorporated
according to the revised guidelines issued by the RBI regarding the entry of private
sector banks in 1993.
Foreign banks are present in the country either through complete branch/subsidiary
route presence or through their representative offices.
Types of Scheduled Commercial Banks
Public Sector Banks
These are banks where majority stake is held by the Government of India.
Examples of public sector banks are: SBI, Bank of India, Canara Bank, etc.
Private Sector Banks
These are banks majority of share capital of the bank is held by private individuals.
These banks are registered as companies with limited liability. Examples of private
sector banks are: ICICI Bank, Axis bank, HDFC, etc.
Foreign Banks
These banks are registered and have their headquarters in a foreign country but
operate their branches in our country. Examples of foreign banks in India are: HSBC,
Citibank, Standard Chartered Bank, etc

Regional Rural Banks

Regional Rural Banks were established under the provisions of an Ordinance
promulgated on the 26th September 1975 and the RRB Act, 1976 with an objective
to ensure sufficient institutional credit for agriculture and other rural sectors. The
area of operation of RRBs is limited to the area as notified by GoI covering one or
more districts in the State.
RRBs are jointly owned by GoI, the concerned State Government and Sponsor
Banks (27 scheduled commercial banks and one State Cooperative Bank); the
issued capital of a RRB is shared by the owners in the proportion of 50%, 15% and
35% respectively.
Prathama bank is the first Regional Rural Bank in India located in the city
Moradabad in Uttar Pradesh.
INTRODUCTION OF ABHYUDAYA BANK

ABHYUDAYA Co-operative Bank Ltd. operates as an urban co-operative bank in India. The
company offers various personal banking services, such as saving bank accounts, current
accounts, no frills accounts, any branch banking services, and ATM services, as well as various
deposit
schemes, including saving, current, and term deposit schemes; and business banking services,
which include mobile and Internet banking, NRO/NRE accounts, and foreign exchange services.
Its loan products include personal, housing, education, mortgage, and vehicle loans, as well as
loan against gold ornaments, loan/secured overdrafts, loans against govt. securities, loan secured
overdrafts against. securities, and loans for women entrepreneurs. The company also provides fax
on demand services that consist of statement of account, latest balance, and inward clearing
cheque details services; telebanking, franking, and lockers services; real time gross settlement
services for customer transaction/remittances; and insurance services. Abhyudaya Co-operative
Bank Ltd. was founded in1964 and is based in Mumbai, India with branch locations in Mumbai,
Navi Mumbai, Pune, Raigad, Thane, Udupi, Mangalore, Vadodara, and Ahmedabad, India.
 THE BEGANNING

 A dedicated group of social workers and labour movement activists, imbued with the
spirit of service to the cause of mill workers, other industrial and hitherto neglected
economically weaker sections of society started Abhyudaya Co-op. Credit Society
Ltd. in 1964, with a small share capital of Rs. 5,000. The area of Kalachowki,Sewri,
Parel and their surroundings were predominantly populated by low income industrial
labour and lower middle class people at that time. In a short period of time
Abhyudaya Co-op. Credit Society got converted into an Urban Co-op. Bank. Finally,
in June 1965, Abhyudaya Co-op. Bank Ltd. was established with the motto
of "Prosperity through Co-operation".

A FORWARD MARCH

 The Bank was conferred with Scheduled Bank Status by Reserve Bank of India in
September 1988. Over a span of 51 years, it became one of the leading Urban Co-
op. Bank in the country with branches in Metropolitan Mumbai, Navi Mumbai, Pune,
Thane, Raigad, Nagpur, Nashik, Nanded, Kankavali, Aurangabad, Ahmednagar &
Pen in Maharashtra State, Vadodara and Ahmedabad in Gujarat State, Udupi and
Mangalore in Karnataka State. On 11th January 2007 the Bank was registered as a
Multistate Co-op. Bank by the Central Registrar, New Delhi. The area of operation of
the bank is confined to 3 States - Maharashtra, Gujarat and Karnataka. The merger
of Shree Krishna Sahakari Bank Ltd., Vadodara, Gujarat State, Janatha Co-op. Bank
Ltd., Udupi, Karnataka State and Manekchowk Co-op. Bank Ltd., Ahmedabad,
Gujarat State has been affected.

VISION

 Our Bank’s plunge to excellence in all directions will be powered by the VISION that
provides overarching inspiration, The VALUES that serve to guide taught & action,
The VITALITY that embarks on strategy formation & execution. The immense
 potential of our Bank will be realized by the distinctive amalgam of the ‘Vision,
Values & Vitality.

MISSION

 To continuously strive for synergy between technology, systems & human

resources for providing products & services that meet the quality, performance &
aspirations of the vast clientele & to maintain the highest standards of ethics &
societal responsibilities, constantly innovate products & processes & develop teams
that keep the momentum going to take the Bank to excellence.

GROWTH & STRENGTH

As on 31st March 2018, the bank has more than Rs. 2.01 lakh members and more
than Rs. 17.86 lakh Depositors. As on 31st March 2018, total business mix of the
bank has reached over Rs. 16,100 Crore. As on 31st March 2018, Bank’s Deposits
have reached upto Rs. 10,691 Crore while Advances have reached upto Rs.
5,44Crore. The Bank has maintained a ratio of CASA Deposits to Total Deposits as
high as 38.81%. The strength of the Bank is reflected in the fact that it’s Paid up
Capital and Reserves have amounted to Rs. 1248 Croreand Investments are to the
tune of Rs. 4,489 Core. The Capital Adequacy Ratio maintained by our bank is as
high as 13.11%

PRODUCTS & SERVICES OFFE D BY ABHYUDAYA CO-OP. BANK

The Bank has launched its interactive website for easy accessibility of various
products & services for its customers. Bank has successfully implemented Core
Banking Solution (CBS) technology, through this technology the bank is offering Any
Branch Banking Service to the customers. Bank is offering Abhyudaya Mobile
Banking Service to its customer through which customer can do Self, Intra, Inter &
IMPS Fund Transfer. Customer can check balance mini statement, cheque request
& host of services through Mobile Banking service. Bank customers can transact
cash, transfer of fund, clearing, remittances, etc. from any branch of the bank. Bank
is offering Abhyudaya RuPay Debit Card which can be used for cash withdrawals,
mini statements, balance enquiry and can be used at Point of Sale terminals for
merchant transactions. The bank has offsite ATM’s installed at Abhyudaya Nagar &
Ghatkopar. Bank is providing all types of Foreign Exchange & Money Transfer
Services such as MoneyGram & Xpress Money. Bank is also offering Tele-banking
and Internet Banking services. Customers of our bank can get monthly
statement of account through email. Bank has installed Cash Deposit Machines at
New Panvel, Vashi & Nehru Nagar, subsequently Bank will install Cash Deposit
Machines at other Branches.
 Bank has implemented Pradhan Mantri Jan-Dhan Yojana (PMJDY) for achieving
the national objective of Financial Inclusion & providing banking services to common
man. Bank has launched Pradhan Mantri Jeevanjyoti Bima Yojana -
(PMJBY) & Pradhan Mantri Suraksha Bima Yojana - (PMSBY). Bank has
registered itself with CPSMS (Central Planned Scheme Monitoring System) which is
a project of Dept. of, Ministry of Finance; New Delhi for providing AADHAAR based
Direct Cash Transfer Benefits (Subsidies) to the customers.

Bank has implemented / adopted other RBI Schemes such as RTGS, NACH, NEFT,
Speed Clearing etc. Bank has taken corporate Agency of LIC of India, The New India
Assurance Co. Ltd. and Relegate Health Insurance. All types of life insurance
policies of LIC, General Insurance policies of The New India Assurance Co. Ltd. &
Health Insurance Policies are made available at all our branches. Out
of 111 branches, 34 branches are rendering all seven days a week service to the
customers. Our customers are free to operate on other banks ATMs through NFS
Network of more than 2.22 Lakh ATMs and customers of other banks can transact
from 114 ATMs machines installed by our bank. The Bank has offsite ATM’s installed
at Abhyudaya Nagar & Ghatkopar. Bank is also offering Demat, Pan Card Facility,
& Online Tax Payment Services through network of our branches. From two
branches viz. Vashi & New Panvel 'Franking' facility is made available for the general
public. 

 Bank has started financial Literacy Cell, at Vashi under its customers education
initiatives. With an intention of providing better customer service bank has taken
various steps such as introduction of toll free number (1800- 22- 9699) for the
convenience of the customer where by customer can get all information pertaining to
the products & services of the bank, missed call facility for balance enquiry on Toll
Free number (1800-419-5511), Card Hot listing Number (9223110011) conducting
customer meets at regular interval, formation of separate customer care dept.,
special counters for Sr. Citizens and handicapped customers etc.
AWARD & PRIZES

 Bank has won the prestigious IDRBT Banking Technology

Excellence Award for the year 2014-15 for ‘Best IT enabled Co-
operative Bank’ Award.
 Bank has won Lokmat Corporate Excellence Award for Brand
Excellence in Banking.
 CH.2 INTRODUCTION OF KYC

KYC is an acronym for “Know your Customer” a term used for Customer identification
process. It involves making reasonable efforts to determine, the true identity and
beneficial ownership of accounts, source of funds, the nature of customer’s business,
reasonableness of operations in the account in relation to the customer’s business, etc which
in turn helps the banks to manage their risks prudently. The objective of the KYC
guidelines is to prevent banks being used, intentionally or unintentionally by criminal
elements for money laundering. Know your customer, alternatively known as know
your client or simply KYC, is the process of a business verifying the identity of its
clients and assessing potential risks of illegal intentions for the business relationship.
The term is also used to refer to the bank regulations and anti-money
laundering regulations which govern these activities. Know your customer processes
are also employed by companies of all sizes for the purpose of ensuring their
proposed agents, consultants, or distributors are anti-bribery compliant. Banks,
insurers and export creditors are increasingly demanding that customers provide
detailed anti-corruption due diligence information. KYC (Know Your Customer) is the
platform on which the company operates to avoid shortcomings in operational, legal
and reputation risks to the institution and the consequential losses by scrupulously
following various procedures laid down for opening and conduct of accounts. Money
laundering is involvement in any transaction or series of transactions seeking to
conceal or disguise the nature or source of proceeds derived from illegal activities
including drug trafficking, armed robbery, tax evasion, smuggling, etc. KYC
guidelines are accepted internationally as an important anti-money laundering
measure.
Know your customer (KYC) is the due diligence and bank regulation that financial
institutions and other regulated companies must perform to identify their clients and
ascertain relevant information pertinent to doing financial business with them. Know
your customer policies have becoming increasingly important globally to prevent
identity theft fraud, money laundering and terrorist financing. In a simple form these
rules may equate to answering twelve questions, but this is the tip of the iceberg and
regulators now expect much more. KYC should not be thought of as a form to be
filled - it is a process to be undergone from the start
of a customer relationship to the end.One aspect of KYC checking is to verify that
the customer is not on any list of known fraudsters, terrorists or money launderers,
such as the Office of Foreign Assets Control's Specially Designated Nationals list.
Beyond name matching, a key aspect of KYC controls is to monitor transactions of a
customer against their recorded profile, history on the customers account(s) and with
peers. Know Your Customer processes are also employed by regular companies of
all sizes, for the purpose of ensuring their proposed agents', consultants' or
distributors' anti-bribery compliance. Banks, insurers and export credit agencies are
increasingly demanding that customers provide detailed anti-corruption due diligence
information, to verify their probity and integrity.

With effect from 1st Feb 2008, KYC is mandatory. Till the time, one gets the KYC
reference number; one cannot invest 50k or more in the Indian mutual funds

Although the phrase “know your customer” may seem insignificant to most people, it
has a very important meaning in the business world. The process of knowing your
customer, otherwise referred to as KYC, is what businesses do in order to  verify the
identity of their clients either before or during the time that they start doing business
with them. The term KYC can also reference the regulated bank practices that are
similarly used to verify clients’ identities.

KNOW YOUR CUSTOMER – WHAT YOU MUST KNOW

Know Your Customer - KYC enables banks to know/ understand their customers and
their financial dealings to be able to serve them better.

Although the phrase “know your customer” may seem insignificant to most people, it
has a very important meaning in the business world. The process of knowing your
customer, otherwise referred to as KYC, is what businesses do in order to verify the
clients either before or during the time that they start doing business with them. The
term KYC can also reference the regulated bank practices that are similarly used to
verify clients’ identities.
Banks and companies of all sizes have become big supporters of KYC. It is
increasingly common for banking institutions, credit companies, and insurance
agencies to require that their customers provide them with detailed information in
order to ensure that they are not involved with corruption, bribery, or money.
Meaning of Customer

For the purpose of KYC Policy, a ‘Customer’ is defined as:

 A person or entity that maintains an account and/or has a business

relationship with the Bank;
 One on whose behalf the account is maintained (i.e. the beneficial owner);
 Beneficiaries of transactions conducted by professional intermediaries, such
as Stock Brokers, Chartered Accountants, Solicitors, etc. as permitted under
the law, and Any person or entity connected with a financial transaction, which
can pose significant reputation or other risks to the Bank, say, a wire transfer
or issue of a high value demand draft as a single transaction.
 FACTOR THAT REQUIRE THE NEED FOR IDENTITY AND
ADDRESS PROOF

The identification of a customer is a very critical process with a view to protect

the customer interests by preventing from fraudsters who may use the name,
address and forge signature to undertake benami / illegal business activities,
encashment of stolen drafts, cheques, dividend warrants, etc. This also helps
to safeguard banks from unwittingly used for the transfer of deposit of funds
derived from criminal activity or for financing terrorism. Identification of
customers will also help to control financial fraunds, identify money laundering
and suspicious activities, and for scrutiny / monitoring of large value cash
transactions.

EVOLUTION OF KYC REQUIREMENTS

No, KYC requirements have always been in place and Banks have been taking
KYC documents in accordance with the guidelines issued by RBI from time to
time. RBI has revisited the KYC guidelines in the context of recommendations
made by the Financial Action Task Force (FATF) on Anti Money Laundering
standards and on Combating Financing of Terrorism and enhanced the KYC
standards in line with international benchmarks

REGULATORY AND LEAGL REQUIREMNTS ABOUT KYC

Regulatory:

In terms of the guidelines issued by the Reserve Bank of India (RBI) on

November 29, 2004 on Know Your Customer [KYC] Standards – Anti Money
Laundering [AML] Measures, all banks are required to put in place a
comprehensive policy framework covering KYC Standards and AML Measures.

Legal:

The Prevention of Money Laundering Act, 2002 (PMLA) which came into force
from July 1, 2005 (after “rules” under the Act were formulated and published in
the Official Gazette) also requires Banks, Financial Institutions and Intermediaries
to ensure that they follow certain minimum standards of KYC and AML as laid
down in the Act and the “rules” framed there under

APPLIACTION OF KYC

KYC will be carried out at the following stages:

• Opening a new account

• Opening a subsequent account where documents as per current KYC standards

not been submitted while opening the initial account

• Opening a Locker Facility where these documents are not available with the
bank for all the Locker facility holders

• When the bank feels it necessary to obtain additional information from existing
customers based on conduct of the account
• When there are changes to signatories, mandate holders, beneficial owners
etc.KYC will also be carried out in respect of non-account holders approaching
the bank for high value one-off transactions.

PERSON RESPONSIBLE FOR KYC PURPOSES IN BANK

The contact point for the customer in the Bank will be the Relationship Manager /
the official who opens the account and who is in touch with the customer for all
transactions.

ABOUT MONEY LAUNDERING

Money Laundering refers to conversion of money illegally obtained to make it

appear as if it originated from a legitimate source. Money laundering is being
employed by launderers worldwide to conceal criminal activity associated with it
suahc as drugs / arms trafficking, terrorism and extortion. All crimes that produce
a financial benefit give rise to money laundering.

MONEY LAUNDERING- ISSUES RELATED WITH OPENING BANK

ACCOUNTS

The first step in the laundering process for criminals is to get their money into an
account with a Bank, often using a false identity and address. The funds so
deposited will be transferred to other accounts locally or abroad or used for
buying goods or services.

These transactions would appear to be like any legally earned money and
becomes difficult to trace it back to its criminal past. Banks under law should not
only prevent this, but should stop criminals who wish to use the banking channel
to launder the ill-gotten money from illegal / criminal activities.

AFFECT OF MONEY LAUNDERING ON CUSTOMERS

A key defense against money laundering is to prevent accounts being opened in

false identities. Anyone wishing to open an account will therefore be asked for
proof of their identity and address. These documents have to be essentially
obtained irrespective of the type of account to be opened and the purpose for
which the account is opened for.The fact that these documents are asked for
opening of account does not mean that you are suspected of money laundering.
Criminals try to appear to be normal law-abiding customers, for example they
may try to open a number of accounts using small amounts of money. Hence it is
necessary to identify all prospective account holders or customers. Anybody
including a criminal could falsely use your identity, if these identity documents are
not obtained.

PROOF OF IDENTITY REQUIREMENT

The best identification documents are those which are issued by a Government
authority, which should have a photograph, address and signature. You may
provide one single document which can establish you identify and address or two
or more documents. For an individual document like copy of the Passport,
Election Identity Card, Driving License, Permanent Account Number (PAN) card,
etc. would be sufficient for the purpose of establishing the identity, address and
signature. Similarly, for other entities like firms, companies, trusts, etc.,
documents like Partnership Deed, Trust Deed, Memorandum & Articles of
Association, Certificate of Incorporation, Registration and Service Tax, License
under Shops and Establishment Act, etc. would be applicable and the branch /
sales staff / call center would be able to help you in providing the details of the list
of approved documents.

CONSEQUENCES OF NOT PROVIDING KYC INFORMATION IN BANKS

The Bank will be entitled to refuse to open the account (if you are a prospective
customer) or discontinue its relationship with you citing non-providing of KYC
information documents (if you are an existing customer). If you however, require
reasonable time to furnish certain non-critical documents you can approach the
branch / sales staff.

GUIDELINES FOR SMALL CUSTOMERS

While the internal procedures of the Bank and the guidelines of RBI require that
satisfactory proof of customer identity and address, RBI has simplified the KYC
procedure with the objective of greater financial inclusion, i.e. making available
the basic banking facilities to those persons who intend to keep balances not
exceeding Rupees Fifty Thousand (Rs. 50,000/-) in all their accounts taken
together and the total credit in all the accounts taken together is not expected to
exceed Rupees One Lakh (Rs.1,00,000/-) in a year.

Bank can also help prevent crime against yourself and others by maintaining the
confidentiality of your account details and identity documents.

INDIAN REGULATIONS ON PREVENTION OF MONEY LAUNDERING

 A customer must know Under the Prevention of Money Laundering Act

(PMLA) 2002, and the Rules thereof, the banks are required to report: -
 All cash transactions (deposits and withdrawals) of the value of more than
Rupees Ten Lakhs or equivalent thereof in foreign currency.
 All series of cash transactions integrally connected to each other, which have
been valued below Rupees Ten Lakhs or its equivalent in foreign currency
where such series of transactions have taken place within a month and the
aggregate value of such transactions exceeds Rupees Ten Lakhs.
 All cash transactions were forged or counterfeit currency notes or Bank notes
have been used as genuine and where any forgery of a valuable security has
taken place;
 All suspicious transactions whether or not made in cash and by way of as
mentioned in the Rules.
 Under regulatory instructions issued by the Reserve Bank of India in
consultation with the Government of India and Indian Bank’s Association
 Demand drafts, mail transfers and travelers’ cheques for Rs. 50,000/- and
above can be issued by banks only by debit to the customer’s account or
against cheque or other instrument tendered by the purchaser and not against
cash payment;
 Demand drafts, mail transfers and travelers’ cheques for Rs. 50,000/- and above
can be poaid by banks only by credit to the customer’s account or through other
banking channels and not in cash.

Importance of ekyc

Should you, as a consumer, care about paperless financial services? Should the
Government of India and the regulators enable the use of electronic know-your-
customer (eKYC) and e-sign? Should the banking and financial industry care?
The short answer to all the three questions is yes. There are compelling reasons for
both consumers and the industry to enable paperless financial products.
We will talk about those compelling reasons, and why having to manually sign,
submit, transport and process paper documents is a great impediment to the
democratisation of finances in India.
Let’s start with costs.
First, paperless products cut costs. Since the processing is being done by a
technology platform that can simultaneously process millions of transactions,
financial institutions can reduce their operating costs on processing paperwork.
The entire process happens between a consumer logged on to the internet using a
mobile phone and the platform.
The reduction in costs can be 2-3% in banking products, and as high as 20-30% for
insurance products. Now, this is a significant reduction. Ultimately, consumers stand
to gain from reduced costs.
Second, what better way to weed out fraudsters? In a paperless processing engine,
an applicant’s eKYC data can be accessed, with customer’s consent, and analysed
instantly.
Not only does this allow processing of applications within minutes (instead of days in
the offline world), it also ensures that digital checkpoints such as Aadhaar-based
one-time password (OTP) are employed to reduce the incidence of identity theft,
fudged signatures, and fake documents.
So not only do consumers spend less on these financial products, the financial
industry also reduces non-performing assets and cuts costs.
Third, and this is the most important bit in furthering the mission of helping
consumers access the right financial product, technology-driven selling gets rid of
the scourge of misselling. Digital platforms allow a consumer to control the levers of
their product search. They can find products best suited to them in terms of
parameters like costs, riders, interest rates and returns.
For example, an average consumer may not know how many riders exist on life
insurance products and what they cost. She may also not know how one insurance
product compares to another. But by going online, she can get all this information
and can short-list the best products, compare them feature-to-feature, and make up
her own mind about what she should buy. So not only is the consumer finding the
right product, she can also instantly get it in a paperless ecosystem.
The Government of India and the regulators have been very supportive of Digital
India, Startup India and paperless technology. However, there are still some
impediments to the paperless distribution of financial products.
Addressing this will require a holistic approach on the part of the financial regulators
and institutions in creating room for e-signing of agreements and OTP-based eKYC
authentication expressly, which are critical enablers for completely digital and
paperless financial transactions. In lay terms, these processes enable consumers to
digitally sign their agreements as opposed to having to visit the bank or having the
bank send them many papers to sign.
Also, the eKYC can be done via OTP on the mobile phone, which again reduces the
need to manually collect and process copies of your identity and address proofs.
eKYC via OTP also removes the need for purchase of hand-held biometric devices
by banks, and the need to meet consumers face to face for biometrics—which
consumes time and money—thereby reducing the benefits of going instant and
paperless.
In India, as a welcome change, the Indian Evidence Act and the Information
Technology Act have both been amended and updated by the legislators to allow the
use of e-signatures.
Further, Aadhaar, unlike other identities, is already biometrically de-duplicated and
provides a higher level of assurance when using Aadhaar-based OTP.
Yet, most intuitions still continue to collect wet signatures on all documents as a
general practice.
Several of our forward -looking financial regulators, via integration with the Aadhaar
servers, have already allowed the use of OTP for application verification for certain
customer segments. However, many of us still collect only physical or biometric data.
To enable a paperless India, banks, insurers, mutual fund institutions, and their
recognised intermediaries must be allowed to accept OTP-based verification, based
on the risk level and category of transaction or with a monetary cap for transactions
as the first step.
With more than a billion people with Aadhaar and people choosing to fulfil their day-
to-day needs via cell phones connected to the internet, paperless financial
transactions should not remain far behind.
 CH.3 REVIEW OF LITRETURE

A literature review is an evaluative report of information found in the literature related

to your selected area of study. The review should describe, summarize, evaluate and
clarify this literature. It should give a theoretical base for the research and help you
(the author) determine the nature of your research.

A literature review surveys books, scholarly articles, and any other sources relevant
to a particular issue, area of research, or theory, and by so doing, provides a
description, summary, and critical evaluation of these works in relation to the
research problem being investigated.

A literature review is able to critically summaries the current knowledge in the area
under investigation, identifying any strength and weakness in previous work, so
helping you to identify them in your own research and thus eliminate the potential
weakness, whilst bringing to the fore the potential strengths. In addition, a good and
full literature search will provide the context within which to place your study.

It is stressed that undertaking a literature review requires developing a complex set

of skills and this you can only do by undertaking literature review. Therefore, before
commencing writing your research proposal, you will need to allocate time to read
the literature that is relevant to your proposed research study.
Prasad and Harker (1997):
in their paper entitled “Examining the Contribution of Information Technology toward
Productivity and Profitability in U.S. Retail Banking “, examined the effect of IT
investment on both productivity and profitability in the retail banking sector. Using
data collected through a major study of retail banking institutions in the United
States, this paper concluded that additional 102 investment in IT capital may have no
real benefits and may be more of a strategic necessity to stay with the competition.
However, the result indicated that there are substantially high returns to increase in
investment in IT labour, and that retail banks need to shift their emphasis in IT
investment from capital to labour.

Verma D (2000):
in his study entitled “Banking on Change”, analyzed the impact of IT on public sector
banks and new private sector banks in India and observed that IT is a threat to public
sector banks. The strength of new private sector banks lies in their fully
computerized branches and services of Internet banking. The study found that ICICI
and HDFC Banks are very active on this front and concentrating on Internet banking
and e-commerce to offer their clients a whole range of products under one roof. New
banks like Global Trust Bank (GTB), Bank of Punjab (BOP), IDBI & UTI banks are
not lagging behind and some of them are concentrating on expansion and
modernization. Some are focusing on mergers and acquisitions for their growth and
hence, public sector banks have done a lot on improving their productivity

Vaneshree Ramalu :
in his dissertation titled an examination of Anti-money laundering initiatives
undertaken by six major banks in South AfricaÅ stated that Banks as well as bank
employees now have legal responsibilities to ensure that they report any suspicious
activity and that they do not knowingly do business with money launderers. All banks
have policies and procedures in place to tackle the issue of money laundering and
controls that are in place are consistent with FICA (Financial Intelligence Centre Act).
The banks acknowledged a direct relationship between staff awareness on
sophisticated crime and increased attempts to launder money and the resulting need
to constantly evaluate and assess their training programmes for quality, impact and
effectiveness. For law regulators and law makers, future challenges for banks in
South Africa include providing more specific guidance on implementing AML in a
coordinated manner and to facilitate a better exchange of information between
various AML partners. An increasingly comprehensive South Africa approach is
needed to defend the banking industry and the country against such growing threats.

Alina Georgiana:
in his Ph.D thesis titled Risk Management in Banking. stated that risk
management must focus on operational risk, reinforcing the climate of confidence in
the seriousness and professionalism of bank employees, the continuation of
education and training of bank staff through participation in training programs
organized by the bank, increasing permanently the computerization of the bank
facilities with new equipment and software products for banking.
Philip J. Ruce :
in his Banking Law Journal titled Anti-Money Laundering: The Challenges Of Know
Your Customer Legislation For Private Bankers And The Hidden Benefits For
Relationship Management (The Bright Side of Knowing Your CustomerÅ) stated
that To protect financial institutions, the past decade has seen a tremendous
amount of new anti-money laundering rules, regulations, and legislation. These
regulations are necessary because of the global threat that money laundering poses;
by some estimates, money laundering accounts for five per cent of the entire world
GDP. Money laundering allows criminal funds to be filtered through the legitimate
economy, disguising its origins and allowing criminals to take advantage of the
funds; it essentially makes crime pay. But the money laundering rules have not been
greeted enthusiastically by those who most need to enforce them: the financial
institutions most vulnerable to money laundering activity. Private banking, which
focuses on affluent clientele, is particularly vulnerable to money laundering because
of a perceived high profitability and intense competition for clients, the high level of of
a perceived high profitability and intense competition for clients, the high level of
developed between relationship managers and their clients. KYC requirements are
often viewed by private bankers as being additional work, additional red tape, and
offputting to clients in a highly competitive field. With client inquiries and a detailed
history of who your clients are, what they do, and where their money comes from, a
private banker is better able to develop a meaningful business relationship with the
client, is better able to anticipate the clientçs needs, and is better able to tailor the
customerçs experience. Knowing your customer does, it seems, have a bright sideÅ.
Jackson and Andrew:
in the Journal of Money Laundering Control, namely, Recognizing and Reporting
Money Laundering: How Well Should You Know Your Customer?Å stated that The
environment for the illicit practice has become more difficult, including proactive
measures such as KYC provisions. Still, KYC is difficult to implement, because there
is no obvious end point to the information that would be useful to a bank manager in
seeking to prevent money laundering, and it will be hard to deal with third-party
introducers (where the main beneficiaries wish to remain anonymous), and it can be
hard to balance KYC with a customerçs right to privacy.

R. RamabhadranPillai :
in his article Banks to tighten know your customer normsÅ presented to The Hindu
Newspaper (Kochi) stated that A public sector bank has already come out with a
notice that the bank will freeze the accounts of customers failing to comply with the
new KYC norms. Similar steps could be expected from several other banks too. It is
not possible to strictly implement a clause to make an account inoperative on the
basis of inadequacy in compliance of KYC norms, said a top official of another public
sector bank.

Nevertheless
the information on enforcing the rules needed to be conveyed to the existing
customers, he said. Bank operations are to be brought under more official scrutiny
owing to an increased general threat perception in the wake of the recent terror
attacks in Mumbai. As part of this exercise, banks will have to pay more attention to
the #Know Your Customerç norms followed by them. The norms include verification
of identity of the customer. Though it was customary to establish the identity of the
customer, several banks had failed to give emphasis on supportive documents. The
new rules being enforced by the banks, under the stipulations made by the Reserve
Bank of India, will tighten the identification regime. The banks have been asked to be
cautious againstthe designs of terrorists for utilizing the banks for terrorist linked
transaction.

H. N. Sinor:
Chief Executive Officer (CEO), Indian Banks' Association (IBA) in his press meeting
said that With the Reserve Bank of India (RBI) stepping up pressure on banking
institutions to follow `Know Your Customer' (KYC) and `Anti Money Laundering'
(AML) norms strictly, IBA is taking initiatives to understand the problems faced by
bankers while implementing these norms by strengthening their existing
technological framework to detect any possible fraudulent activity. The association is
organizing a conference for bankers in Mumbai and similar ones in other cities in
future. Banks in India can no longer afford to take a lax approach towards KYC and
AML norms and the actions stipulated by the RBI against banks indicted in the
recent initial public offer (IPO) scam emphasize the need for strengthening KYC and
AML policies and processes in banks. Putting in place an effective KYC and AML
framework is required for cross-border correspondent banking relationships also.
Despite due diligence in KYC, "banks on their own cannot be expected to weed out
all known criminals (black list) or the possible ones (watch list), as it is not their core
business activity. What the banks need, therefore, is a single reliable source which
can provide them with an updated list of such criminals or suspicious entities".
Bagchi S. [2008]:
Institutional provision of home loans is a societal compulsion and, as such, is a full
scale national priority of emerging economy like India. The existing regulatory and
institutional framework in India for meeting the growing needs of the people “to own
their nest” is fairly adequate and should continue. But recent reports from various
sources indicate that some home loan borrowers have been playing foul with banks
in offering mortgage of the same property to a number of banks by providing false
ownership deeds / documents. Usually this type of fraud appears because Banks,
generally, prefer to obtain simple deposit of title deeds i.e. (mortgage by deposit of
title deeds) but it was found that title deeds of some property were offered by having
multiple registrations of the property, false income details, credit officer not
investigating properly borrower‟s income level, genuineness of title deeds ,bank
lending the loan before accepting mortgage of landed property as a security cover,
title scrutiny and non-encumbrance report from bank‟s approved lawyer. Generally,
the lawyer goes through the ownership records of the house for the past 30 years
and submits his reports but in practice, lawyers generally scrutinize only of
photocopies of title deeds so, the recent incidents of fraudulent mortgage practices
need to be dealt with firmly. For this purpose, an external protection for banks by
way of title insurance is an immediate necessity. Skilled and experienced officials
may be entrusted to handle home loan account. Only registered mortgage should be
accepted. In the light of increasing credit risk in home loan accounts, repayment
period should not go beyond 10 / 12 years. If in the process, the quantum of loan is
not found justified in consideration of income level, the applicant should go in for
lowercost home or alternatively raised unsecured funds. This is the suggestion made
by Bagchi in

his article. Safe, sound and healthy loan portfolio in a bank is the product of a
robust credit risk management system duly aided / supported by regulatory
supervision.

Bhattacharjee K [2007]
A reverse mortgage is a home equity loan offered to senior citizens that permits
them to convert home equity into cash while they retain ownership. A reverse
mortgage works like a traditional mortgage loan, only in reverse direction. A borrower
does not make regular payments to a lender; instead he/she receives payments from
the lender. The first reverse mortgage loan launched by Dewan housing in 2006.
Reverse mortgage product name was “Saksham”. Then ICICI and NHB launched a
new product of reverse mortgage. Reverse mortgage can provide a valuable income
source for seniors who own property but lack liquid assets. So it is mainly meant for
home-rich senior citizens who are otherwise cash-poor. This is precisely the scenario
where reverse mortgage products can be a boon to senior citizens and a business
for the lenders.
Cendrowski, Mitin & Petro [2006] :
“Fraud deterrence is the proactive identification and removal of the causal and
enabling factors of fraud.”Fraud deterrence is based on the premise that fraud is not
a random occurrence; fraud occurs where the conditions are right for it to occur.
Fraud deterrence attacks the root causes and enablers of fraud; this analysis could
reveal potential fraud opportunities in the process, but is performed on the premise
that improving organizational procedures to reduce or eliminate the causal factors of
fraud is the single best defense against fraud. Fraud deterrence involves both short
term (procedural) and long term (cultural) initiatives. Fraud deterrence is not earlier
fraud detection, and this is often a confusing point. Fraud detection involves a review
of historical transactions to identify indicators of a nonconforming transaction.
Deterrence involves an analysis of the conditions and procedures that affect fraud
enablers, in essence, looking at what could happen in the future given the process
definitions in place, and the people oper
G V Ramana Rao [2011]

Financing to various sectors in Indian banking is generally in accordance with the

policies of the Government. When Government of India declared its housing and
habitat Policy in 1997 and stated that there is a demand for 13.66 million new
dwelling units in India, it appeared a
lucrative business avenue for the banks to finance. To encourage and motivate
people to construct houses by borrowing, Government of India provided relief under
Income Tax Act under Section 80C for repayment of housing loan installments and
rebate on interest on Housing Loans. In the process, a large number of banks
entered the arena triggering fierce competition. Almost all the banks went in for huge
target –oriented lending to this sector. Inadvertently, this great rush for financing
housing generated an opportunity for miscreants to make a killing. They have tried to
manipulate the lacunae in the system of processing of sanction of loans by banks. It
is said that the strength of a chain depends on its weakest link. In the processing of
housing loan proposals, the most over-looked areas have become vulnerable points
for perpetration of frauds. Unfortunately, criminals and fraudsters are always a step
ahead of the lawmakers and find many ways to defraud individuals and institutions.
Jaco Melissa B. [2002]:
She concluded that public investment in and promotion of home ownership and the
home mortgage market often relies on three justifications to supplement shelter
goals: to build household wealth and economic self-sufficiency, to generate positive
social psychological states, and to develop stable neighborhoods and communities.
Home ownership and mortgage obligations do not inherently further these objectives,
however and sometimes undermine them. The most visible triggers of the recent
surge in subprime delinquency have produced calls for emergency foreclosure
avoidance interventions (as well as front-end regulatory fixes). Whatever their merit,
she contend that a system of mortgage delinquency management should be an
enduring component of housing policy. Furtherance of housing and household policy
objectives hinges in part. On the conditions under which homeownership is obtained,
maintained, leveraged, and in some situations exited. Given that high leverage or
trigger events such as job loss and medical problems play significant roles in
mortgage delinquency independent of loan terms, better origination practices cannot
eliminate the need for delinquency management. In terms of analyzing this
framework, it is tempting to focus on its impact on mortgage credit cost and access
or on the absolute number of homes temporarily saved, but her proposed analysis is
based on whether the system honors and furthers the goals of wealth building,
positive social psychological states, and community development. Because those
ends are not inexorably linked to ownership generally or owning a particular home, a
system of delinquency management that honors these objectives should strive to
provide fair, transparent, humane, and predictable strategies for home exit as well as
for home retention.
Joshua Rosner [2001]
He studied the prospects of the U.S. housing / mortgage sector over the next several
years. Based on his analysis, he believes that, there are elements in place for the
housing sector to continue to experience growth well above GDP. However, he
believes that there are risks that can materially distort the growth prospects of the
sector. Specifically, it appears that a large portion of the housing sector‟s growth in
the 1990‟s came from the easing of the credit underwriting process.

Kalpana Chandraprakash Satija [2009]

The banking sector in India underwent an unprecedented transformation in the

1990s with the emergence of a large number of private as well as foreign
multinational banks entering the country increasing rapidly the number of banks in
India due to the economic reforms. So the banking activities increased manifold and
affected a large number of areas of operation of banks, particularly in the field of
bank lending. Banks operate on the pattern of extending credit against security given
by its customers associated with the bank. The facility of extending credit agencies
are recognition of the changing times in which banks have to operate in a changing
and ever evolving economic scenario. Growing needs and realisation of higher rate
of investments is giving birth to bank credit in India.

Lall Vinay [1984]

He has focused attention upon „formal factor‟ (Permanent Construction) which

served mainly to the HIG and MIG, the loan meets only 47% of the price of the
house, forcing the borrowers to make very large down payments. Also the price of a
typical house was above 3 times the annual families‟ income of the borrowers. In
spite of, the entire system of housing allocation and credit the supply of affordable
funds was much smaller than demand. Thus, large growth in urban population and
the historically low priority given to housing, supply falls very short of demand and
need. Therefore, not only that the volume of saving and investments should increase
but also larger volumes of capital should flow into housing.

Also, accessibility and terms and condition of housing credit will determine the long
term redistribution performance in housing.

M. Mahadeva [2004]
In this article, the author has analysed the nature and distribution of the housing,
problem in Karnataka and examined how the state has addressed this issue. In
particular, it considers the strategies adopted during the 90s and identifies a number
of failures including the task force on housing. Some of the major weaknesses,
pertaining to incidence by type and by ruralurban areas, on approaches, on financial
requirements and issue of development and redevelopment are examined to
propose alternative policy strategies to effectively address the housing problem in
the state. From the analysis it is found that Karnataka is not an exception to the
general rule that housing strategies, which were evolved over decades, have not
taken the direction expected. By and large, the sectoral policies pursued were only
ad hoc without a clear focus.

M. K. Singh [2005]
Essentially, fraud is a manifestation of the failure or short circuit of internal controls
and systems at operating level. However, periodical visits of the Controller to
branches and close monitoring of control returns, is of critical importance in the
prevention of frauds and related malpractices.

Manoj P K [2010]
Formal system for housing finance in India is primarily dominated by two major types
of institutions, viz. commercial banks (CBs) and housing finance companies (HFCs),
and a very small share of the market (nearly 0.5 percent, for the last few years) goes
to the third group viz. co-operative sector institutions. Of the two major groups, the
HFCs which dominated the market till FY 2002 were overtaken by CBs in FY 2003
and since then CBs have been leading the market. Consequently, although HFCs
are specialized institutions in housing finance, their market share and profitability are
growingly under threat year after year. Thus, enhanced operational efficiency has
become a vital pre-requisite for survival and growth of HFCs. In the above context,
this paper seeks to (i) make an overall review of the emergence of the institutional
system for housing finance in India and to trace the broad pattern of its composition
over the years, (ii) study the major problems and challenges faced by HFCs,

particularly in comparison with CBs, the other major group, (iii) Analyse the
operational efficiency of the major HFCs and to benchmark them based on their
relative operational efficiency, and (iv) suggest suitable strategies for enhanced
operational efficiency of HFCs in India.

Padhi Manohar [2007]

This article addressed the key issues of housing loan frauds. Aggressive growth in
housing finance by the banks is for the reasons of Tax incentives on repayment of
principal and interest, rising income level of the middle class, affordable interest rate,
completion amongst banks and housing finance institutions, low returns on other
investments, low incidence of NPA, and housing as priority sector lending for banks.
Housing loans as a percentage of GDP, is 57% in UK, 54% in USA and it is only
2.5% in India. It shows vast scope for housing loans in India. Increased focus of
banks in housing finance is also not free from fraud. Fraud is one of the reasons for
turning the housing loan account to NPA. The main reason for housing loan turning
NPA are loss of job, closure of the factory/company, illness of the borrower, dispute
between builder and borrower, over-finance to the borrower, agents approaches the
bank for section of housing loa ns in bunches, sections of loan on fabricated
documents without proper verification (Benami A/C, submission of fake title deeds of
immovable property, colored Xerox copy of the title deed, subject of fake income
certificate etc.) but the precautionary measures prevent the frauds in housing finance
like – pre-sanction appraisal, documentation and creation of charge and post-
sanction follow-up. The other preventive measures like Identification of Borrower,
Guarantor and Branch should insist opening of bank A/C as per KYC Norm, pre
sanction verification report, site verification, existence of property, valuation of
property photo of the immovable property, approval of map and cost-estimate,
scrutiny of title, end-use verification of amount disbursed. Pay order should be
issued in the name of banker, cross verification with balance sheet document of title
should be in DEMAT form, in case of large value of loan bank approach
subregistrar‟s office to verify, Bank should develop in-house expertise etc.

Phogat M. [2006]
This article gives the measures for the housing loan frauds in banks. The author
concluded that housing for all envisaged 2 million houses every year out of which 0.7
million are in the urban sector. Government provided certain relief under Income Tax
Act. It motivated many people to avail housing loan. The author thinks that different
frauds committed on various

banks can be divided into the following two categories. i.e. Pre sanction and Post
Sanction. KYC related due weakness in pre inspection, Benami A/c, forged title
deeds, by selling same flat to different people, inflated salary certificate, filing of IT
return for the last three years in one lot and particularly by paying a nominal amount
of tax, valuation of the property is manipulated to manage margin money are post
sanction fraud. The precautions may be taken at the bank level to avoid the
assurance of fraud i.e. KYC norms be followed, main salary A/c should be verified,
loan should be granted against the flat / houses built by reputed builders only. An
undertaking from the builders for not been sold to any other person, search report of
property to be conducted by the advocate, original title deeds, property tax, electricity
bill, kept on records. Disbursement of loan should be made after spot verification,
title deed should be scanned through ultra violet ray machines before mortgage and
bank should independently verify the report and no middle man should be involved in
the process and entire KYC. So the author points out that above mentioned
precautions will enable the bankers to curb frauds and public money can be saved.

Rao K. N. et.al. [2005]

In this paper the authors revealed that during 2002-03 housing loans by banks grew
at a hefty growth rate of more than 100%. The factors that contributed to this
aggressive growth in the portfolio of housing loans of banks and HFC are: Tax
intensives on repayment of principal and interest, rising income level of middle class,
falling interest rate, stable real estate prices, easy availability of housing loans, low
returns on the investment opportunities available in the market. They also concluded
that although there is strong growth in housing loans by financial situations in India,
we are still behind the developed countries in terms of housing loans to GDP ratio. In
India it is around 2.5% compared to 57% in the UK and 54% in the US. It shows that
there is a vast scope for housing loans in India. One economist has argued that
every rupee spent on the housing sector will increase the GDP by more than 75
paise. It also creates a labour intensive.Despite the immense growth in housing
loans there are certain challenges that the banks might face in the time to come, e.g.
falling rate of interest, rising mismatch in the assets and liabilities of the bank, rising
NPA in the housing loan portfolio, etc.

Rao K.N. [2006]

According to Rao, housing finance is a long term proposition involving many risks for
the lenders, borrowers and even for the economy in general. As housing finance is a
long term

game, it requires proper asset-liability management strategy, the borrowers also face
interest rate risk, especially when they are locked in fixed rates when interest rates
are falling and floating rates are rising. The author mentions in this article that home
loans have been registering exponential growth in India during the last six years.
Easy liquidity conditions, low interest rates, availability of tax shelters on repayment
of principal and interest surging demand from middle income group borrowers, lower
regulatory capital, the comfort of tangible security have all collectivity contributed to
the spurt in home loans. HDFC, ICICI and SBI are the major players in disbursement
of home loans. These banks sanction upto 85% of the cost of the property as home
loan for a maximum period of 20 to 30 years. Europe has a very advanced mortgage
market. In Italy foreclosure will fructify in 120 months whereas it takes just 6 months
in Sweden and 9 months in the Netherland. Securitization route is employed by
banks essentially to raise finance securitization process have given tremendous
thrust to housing finance in countries like the US and Europe. It is a process of
selling homogeneous loans for cash by the financing banks, to a special purpose
vehicle. The SPV in turn collects money by selling bonds, which have the security
backing in the form of home mortgages. Chinese banks do not have any significant
exposure to housing loans. The Latin American countries do not have an efficient
institutional mechanism for disbursing housing loans.

Rudra P. Pradhan [2009]

The paper examines the causal nexus between financial development, economic
growth and poverty reduction in India during 1951-2008. The empirical analysis is
based on co integration and causality test. The co integration test finds the presence
of long run equilibrium relationship between financial development, economic growth
and poverty reduction. The Granger causality test at the end confirms the presence
of unidirectional causality from poverty reduction to economic growth, economic
growth to finance development, financial development to poverty reduction and
economic growth to poverty reduction. It also finds no causality between finance
development and economic growth, and poverty reduction and finance development.
The paper suggests that economic growth is considered as the policy variable to
accelerate finance development and both could be used as the policy variable to
reduce poverty in the economy.

Singh Fulbag et.al. [2006]

In this paper, the authors have studied the housing finance in India. Housing, as one
of the three basic needs of life, always remains on the top priority of any person,
economy, government and society at large. In India, majority of the population lives
in slums and shabby shelters in rural areas. The paper is based on the case study of
LIC Housing Finance Ltd., which analyzes region-wise disbursements of individual
house loans their portfolio amounts and the defaults for the last ten years, i.e., from
1995-96 to 2004-05 by working out relevant ratios in terms of percentage and the
compound annual growth rates.

Srinivas S.P. [2006]

The study revealed that disbursement of home loan increased at increasing growth
rate during the growth rate of disbursement in 2000-01 compared to the earlier year
was 13.7% which increased up to 76% in 2002-03. The reasons behind the growth in
housing loans are, (i) Easy availability of housing loans (ii) Growing population (iii)
Nuclear family system (iv) Newer segments for finance (v) Urbanization of Indian
economy (vi) Shortage of dwelling units (vii) Declining of cost of house to income
ratio etc and, (viii) Tax benefits.

The study revealed that banks have also concentrated on housing loans because the
housing loans are totally secured as the mortgage on the property securities the
loan. Also the capital adequacy requirement for general lending is at 100% for
housing loans. The processing and documentation of housing loan is very easy due
to extensive utilization of technology. But there are also some common frauds
occurring in housing finance like an individual‟s inflate their income statement,
manipulate the income tax returns, inflate the value property, lack of appraisal &
follow up etc. The researcher has also explained the new concept of NPL
(Nonperforming loan). The housing finance has been associated very low risk. But
empirical evidence suggest that non-performing loan in the Indian housing finance
sector are much higher than in a developed market. NPL rise in India because of
willing defaulters and an emerging population of fraudsters. This is also a reflection
of industry‟s aggressive marketing and some inadequacies in appraisal standards
and system. Such high NPL have two-fold impact i.e. they depress yield and entail a
credit cost in the form of provisioning and writeoff. The researcher also found that the
NPL of housing finance companies are higher than the banks. The suggestion given
by researcher is that if the banks have not taken the prudential norms for housing
loans they have to conduct recovery mela instead of present loan mela.

Usha Throat [2006]

The author Dy. Governor of RBI has traced the evolution of UCBs their unique
structure strengths and weakness and RBI approach to strengthen the coop sector.
The author has examined corporate governance issue in UCBs and discussed the
international best practices for credit union, internal, external and individual,
governance and role of board of directors and policy initiatives taken by RBI.

Vandna Singh & Komal [2010]

The present paper entitled “Prospects & Problems of Real Estate in India” is an
attempt to reveal the issues concerned with real estate investment sector in India.
This paper is concerned with the investment on real estate in India and the trends in
the concerned industry. The paper has been divided into three sections. Section one
deals with the fundamental factors affecting the real value like demand, supply,
property, restrictions to use and site characteristics. Section two and three explains
the causes and the constraints to the present real estate boom respectively in India.
The paper also presents the suggestions and future prospects of real estate in the
country.
 CH.4 DATA ANALYSIS

Primary data:
Primary data has collected directly from customers through structured
questionnaires (individual sample units)
Secondary data:
Secondary data has collected from the various magazines, journals, website, of
Abhyudaya bank and various websites.
Sampling method:
The population includes male and female customers residing in the area of Mumbai
with the criteria: customers with Abhyudaya bank .in this project convenience
sampling method is followed.
Convenience :
In convenience sampling, a sample is obtained by selecting convenient population
elements from the population.
Sample size:
Our sample size was 95, who fulfil the basis criteria -customers with Indian bank.
Sampling unit:
A sample unit is single individual, who is having bank accounts.
Data collection method:
Self -administered personal survey method was used to collect the necessary data.
For the purpose appropriate questionnaires were designed.

Data collection instrument:

Appropriately designed questionnaire to facilitate self- administered surveys with
simple standard questions were used to collect data.
Structure of Questionnaire:
The questions formulated were structured and non-disguised. The questions were
asked in order to get all the necessary information and to see that the respondents
could answer them with case. This pattern adopted facilitated in analysing the data.

4. DATA ANALYSIS
Pia diagram of data analysis

RESPONSES PERCENTAGE (%)

MALE 55.7%
FEMALE 44.3%
TOTAL 100%

GENDER

MALE
FEMALE
45%

55%

Interpretation:
 The above diagram explains that there are 100 students who had responded
the gender.
 In the above 100 responses , there are 55.7 male and 45.3 females.
Age Group

RESPONSES PERCENTANGE
18-20 58.6%
21-30 32.9%
31-40 8.6%
41-50 -
TOTAL 100%

AGE GROUP

18-20 21-30 31-40 41-50

Interpretation:
 The above diagram explain that there are 100 students who had
responded the age
  In the 100 responses there are only 58.6% students who is below 18-
20 age, in 21-30 age there are 32.9% students ,in31-40 age there are
8.6% students

PROFESSION

RESPONSE PERCENTAGE
STUDENT 67.1%
EMPLOYEE 12.9%
PROFESSIONAL 14.3%
BUSINESS 5.7%
TOTAL 100%

6%

14%

13%

67%

STUDENTS EMPLOYEE PRDFESSION BUSINESS

INTERPRETION:
 The above diagram explain that there are 100 students who had responded.
 In the 100 responses, there are 67.1% students and 12.9% are
employee,14.3% are profession,5.7% are business.
 Due to this, the student response are more than the profession, employee,
student, business.

Do You Have Account In Bank?

RESPONSE PERCENTAGE
YES 97.1%
NO 2.9%
REMARK 100%

YES NO

INTERPRETION:
 There are 97.1% customer having account in the bank.
 There are 2.9% customer no account in the bank.
Do You Know About kyc?

RESPONSE PERCENTAGE
YES 88.6%
NO 11.4%
REMARK 100%

YES NO

INTERPRETATION:
 There are 88.6% customer aware about the kyc.
 There are 11.4% customer not aware about the kyc.
Do You Know The kyc Requirements For Opening Bank Account?

RESPONSE PERCENTAGE
PROOF OF IDENTITY 28.6%
PROOF OF ADDRESS 5%
BOTH OF ABOVE 61.4%
NONE OF ABOVE 5%
TOTAL 100%

PROOF OF IDENTITY PROOF OF ADDRESS BOTH OF ABOVE NONE OF ABOVE

INTERPRETATION:
 The above diagram explains that there are 28.6% customer who are telling
proof of identity are required.
  The above diagram explains that there are 61.4% customer who are telling
both of above.

Do you know the document to be given as proof of identity proof of address?

RESPONSES PERCENTAGE
ADHAR CARD 38.6%
PAN CARD 5.7%
DRIVING LICENSE 7.1%
ALL ABOVE 48.6%
TOTAL 100%

ADHAR CARD PAN CARD DRIVING LICENSE ALL ABOVE

INTERPRETATION:
 The above diagram there are 48.6% customers are voted for all above.
 There are 38.6% customers are voted for Adharcard, 5.7% customers are
voted for pan card, and last 7.1 customers are voted for driving license.
 Can I Open a Bank Account with only an ADDHAR card?

RESPONSES PERCENTAGE
YES 65.7
NO 34.3
REMARKS 100

Column1

yes no

INTERPRETATION
 The above diagram shows that there are customers they know Aadhar
card is only a bank account.s
 And few are voted for no.
Can I Purchase a demand draft, cheque against cash without Kyc?

RESPONSES PERCENTAGE
YES 47.1
NO 52.9
REMARK 100%

Column1

yes no

INTERPRETATIONS:

 The above diagram shows that there are 47.1 customers are voted for yes.
And there 52.9 customers are voted for No.
Do I need to submit Kyc documents to the bank while purchasing third party
products?

RESPONSES PERCENTAGE
YES 72.9
NO 27.1
REMARK 100

YES NO

INTERPRETATION
 In the above diagram the customers are highly voted for yes so
Its found that third party transition are required the documents.
 And the remaning are voted for no.
Are you aware the rules regarding opening bank account without kyc?

RESPONSES PERCENTAGE
YES 62.9
NO 37.1
REMARKS 100

Column1

YES NO

INTERPRETATION:
 The above diagram shows that there are 62.9 customers are aware the rules
of bank.
 And the remaining customers are not aware of the rules of banking.
Can you open bank account without the document like addhar card?

RESPONSES PERCENTAGE
YES 37.1
NO 62.9
REMARK 100

Column1

TES NO

INTERPRETATION:

The above diagram showing that there is highly impact on Aadhar card nowdays in
bank so therefore 85% customers are voted for the survey
 CH.5 FINDINGS

 KYC is the mandatory process for all the banks whether it is private bank or
govt bank.
 Account opening procedure is more easy in cooperative bank
 In my study I found that all banks provide KYC of all type of account and there
is on big differences between formalities.
 All banks follow rules and regulations according to RBI rules.
 In bank customer face difficulaties to provide their details because number of
them are illiterate.
 I found that customers who are not having Aadhar card and pancard are not
fill their kyc details.
 I had found that having Aadhar card in nowadays are important to banks.
 It is found that many of customers in abhyudaya bank are aware the kyc
requirements.
 CH.6 CONCLUSION

There is positive significant relation between customers possessing a kyc in banking.

It is based on the documents namely Aadhar card, pancard there is the documents
to use to fill their kyc details. Nowadays Aadhar card link to bank account is
important in banking sector. A study shows that the customers are aware the form of
kyc so they asked the clerk to help them out. Banks are often criticed for using kyc
norms as on excuse to complicate the process of opening account many have
registered c complaints as grahak seva, the government customer grievances
partial, Allegis banks repeatedly seek. Kyc documents even after as for they
provided. Kyc processes are also employed by regular companies of all sizes for the
purpose of ensuring agents.
 CH.7 SUGGESTION:

 It helps banks and financial institution by providing security measures to

prevent future details.
 Periodical updating of records also helps prevent frauds in customer
accounts.
 Updating KYC every two years is not justified.
 Today, most of the people have accounts in bank. The number of customers
are not aware the meaning of kyc .
 This paper If you do not provide the required documents for KYC, the bank
may not be able to open your account.
 Nowadays kyc is mandatory of banking industry.
 As technology is changing the teenagers start using mobile phones. So the
banking transition are easy.
 Most of the customers are filling their kyc details.
 few of them are not aware the process of kyc or why it is important in banking.
 8. ANNEXURE
Questionnaire
Survey on a study on problem faced by Abhyuadya bank filling their E-KYC
details.
1. Name*

2. Gender*

0 male
0 female
3. Age
0 18-20
0 21-30
0 31-40
0 41-50
4. Profession
0 student
0 Employee
0 professional
0 business
0 housewife
5. Do you have account in bank?
0 yes
0 no
6. Do you know about KYC?
0 YES
 0 NO
7. Do you know the kyc requirements for opening a bank account?
0 proof of identity
0 proof of address
0 both of above
0 none of above

8. Do you know the documents to be given as proof of identity proof of

address?
0 Aadhar card
0 pan card
0 driving license
0 all above
9. Can I open a bank account with only an Aadhar card?
0 YES
0 NO
10.Can I purchase a demand draft, cheque against cash without kyc?
0 YES
0 NO

11. Are you aware the rules regarding opening bank account without kyc?
0 YES
0 NO
12. Can you open bank account without the document like Aadhar card?
0 yes
0 no
 9. BIBLIOGRAPHY:

 
WEBSITE
1. https://www.scribd.com/doc/76284231/KYC-Norms-Full-Project
2. http://vikaspedia.in/social-welfare/financial-inclusion/know-your-
customer-guidelines
3. https://www.abhyudayabank.co.in/english/KYC.aspx
4. https://www.camsonline.com/Downloads/Annexure-KYC-Individual.pdf