Cutting red tape, KYC norms to be simplified

Tribune News Service

New Delhi, February 1

In addition to the rejig in personal income tax slabs, the Union Budget imparted another feel good factor by promising to reduce red tape. These would include an end to harassment for KYC (Know Your Customer) updation, making PAN a “common identifier for all digital systems of specified government agencies through a legal mandate” and easier claim to own funds impounded and pooled by regulators.

The KYC process will be simplified by adopting a ‘risk-based’ instead of the ‘one-size-fits-all’ approach, the Finance Minister announced. However, KYC rules are already ‘risk-based’ as per the RBI which has directed an update once every two years for high-risk customers, once every eight years for medium-risk customers and once every 10 years for low-risk customers. If there is no change in status, address or identity, low-risk customers can also update KYC through simple self-certification. Sitharaman also announced that a “one- stop solution for reconciliation and updating of identity and address of individuals maintained by various government agencies regulators and regulated entities will be established using DigiLocker service and Aadhaar as foundational identity’’. However, it is not clear whether the old DigiLocker will continue or a new one will be required. For businesses, a law would enable the use of PAN as the common identifier for all digital systems of specified government agencies.

Also, an integrated IT portal would be established for investors to reclaim unclaimed shares and unpaid dividends from the Investor Education and Protection Fund Authority (IEPFA) with ease. It is not known whether this means that the existing online system for such a purpose will be revamped or replaced by a new one. At the same time, this assurance remains to be extended to reclaiming bank deposits, PF, post office deposits, National Savings Schemes and mutual funds.

The Budget announced two “Vivad se Vishwas” schemes for MSMEs. One will return 95 per cent of the forfeited amount in case of failure to execute contracts during the Covid period and another is a voluntary settlement scheme where there is a court case.

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