Sebi is working on simplifying KYC (know your customer) process for rural customers in a bid to bring more such investors to capital markets. Sebi recently allowed its rural customers to deal in the capital market to the tune of Rs 20,000 at one go and Rs 50,000 per annum in cash.
"The present KYC norms are a hurdle but because of money laundering issues we cannot do away with them either. In rural areas, this is a bigger issue as people don’t have proper documentation. Even in urban areas people find difficulty in going for KYC documentation time and again. Hence, we are planning to come out with a single KYC form," Sebi Whole-time Member Rajeev Kumar Agarwal said. He was addressing a meeting on financial distribution organised by leading industry body CII.
Agarwal said since KYC norms for opening a bank account have become very difficult today, Sebi plans to allow rural people to trade in cash or simply subscribe to a mutual fund by paying cash.
"Another issue is relating to cheque or cash transaction. Considering the issues prevailing in the rural areas, you cannot do away with the cash component as not even 50 percent of households have bank accounts," he said.
"That is why we have recently liberalised the system a bit and allowed cash transactions up to Rs 20,000 at a time and Rs 50,000 per annum," he added.
To make capital market access smoother, last Budget proposed to introduce uniform KYC norms and inter-usability of KYC records across the entire financial sector. The move can help individual investors with multiple service providers such as banks, insurance firms and mutual funds.