Know Your Customer norms are an important element of record keeping in Banks, Companies and several other agencies which manage the identity of people. India is now moving into Aadhar usage which makes the Identity management a very important aspect of Governance.

Failure to maintain proper KYC results in frauds and hence security professionals including the undersigned support KYC as an important requirement for Banks and investment agencies.

However, we need to also recognize and address that some agencies donot understand the real essence of KYC and make it a documentary exercise which is not helping the cause. At the same time it is putting off genuine people from using certain services properly.

i would like to highlight the problems of an irrationally rigid and improper KYC procedures being followed by some investment agencies such as Karvy Consultants which is putting investors into lot of difficulties.

I also want to suggest a solution for the consideration of both Karvy Consultants as well as SEBI and other agencies.

For the last several years I have been having a running battle with Karvy to get my addresses in some of the companies where I held shares changed. I have been an investor in the pre-demat era and most of my holdings were from the era where KYC was not a norm for either application for shares or for registration of shares. Share registers were held by respective companies and the system of recording proper name and address was not fully developed. There used to be number of mistakes in spelling in the names even in the share certificate itself. Spelling mistakes in addresses did not matter since the postal authorities would deliver the dividend warrants and other communication despite small errors. Hence the system was tolerant of some human errors in recording correct name, initials and address.

With the computerization, the deficient records got computerized along with the deficiencies and some times more of it. In the last few years there have been a spate of different identity documents issued to investors which has complicated the issue further. Presently documents such as the Passport, Aadhar Card, Bank Passbok, PAN Card, Ration Card, Voter Card, Driving license are all used as identity documents. Land line Phone bills, Electricity bill or Gas bill is often used as address proof.

These documents become defining documents which determine the KYC formalities. When there are discrepancies in such documents and they are not compatible, it gives raise to a serious difficulty in transactions involving KYC.

In the net world also we find such multiple IDs creating a problem either on the e-mail or social network. Some foreign digital signature certificate issuing companies provide facilities for attaching multiple e-mail IDs to one digital certificate which solves problems arising out of such multiple e mail IDs.

In view of the computerization and inconsistencies in different documents the inconsistencies in different ID documents and also the errors in registration of investors is creating a serious problem to genuine investors.

I have been personally experiencing the difficulties in this regard and the harassment I have felt from Karvy has forced me to go out of new investments and almost abandon my earlier investments. Add to this the Companies which have been de-listed and not traceable, Corporate investments have become untenable except for professional investors. These problems will get compounded when the investments need to be inherited by the legal heirs. Many legal heirs will be unable to encash or transfer the securities owned by their parents.

It is the responsibility of SEBI to find a solution to this problem.

For example, I am registered with several companies as share holders in names such as “Vijayashankar Nagaraja Rao” which can be taken as an official name. But in its rendition, the name may be written as “Vijayashankar Nagarajarao”, “Na.Vijayashankar”, “Vijaya Shankar” (with or without initials), “Vijaya Shanker” (with or without space and initials) etc. Similar issues may arise in the rendition of names for the joint account holder which will add one more name along with errors in its rendition. I am sure that there are others with more complicated name structures who may have even more problems.

When a registrar like Karvy needs to complete KYC for such investors, they need to know how to overcome what apparently is a human error in registration of names.

My experience with Karvy is that they often misplace old records and whenever a new transaction is to be done, they hold the transaction and request for new KYC. In my case they have held back address change requests and demat requests on the basis of signature differences and KYC requirements. I suspect that the reason is because they must have lost the old records and want to only update the records with new documents.

There is no issue on updation of records except that according to the procedure which Karvy has introduced, the share holder needs to spend around Rs 325/- for each change along with the physical problems associated with getting a Rs 100 stamp paper, an affidavit thereon and a letter from a Bank (Forw hcih Banks charge a hefty amount as fees) . Even after this, it is not possible to fulfill the formalities entirely to the satisfaction of Karvy since the documents are badly drafted in the first place.

I therefore urge SEBI to take a fresh look at the problems and design a proper procedure to set right the human errors that have crept into the system. One suggestion I have is that I should be permitted to create one “Omnibus Identity Affidavit” which can be usedd across companies and across registrars, demat agencies and Banks where I declare that ” I hold multiple IDs in the following different renditions. My recommended name rendition is ………, I authorize all agencies to make suitable changes in their records to synchronize with my main ID document which is my Passport where my name is rendered as ….  and my address is rendered presently as ……… I indemnify such agencies against any loss they may suffer on account of such change.”. ..etc

Copies of such affidavits should be considered sufficient for every KYC application. Beyond this, if the agency has issues, they should conduct a personal inspection and complete the process. If after this, they are not satisfied with the request for change, then they may handle such cases as exceptions through a responsible personal relationship manager.

 I also urge SEBI to take suitable action in this regard to introduce acceptance of an “Omnibus Identity Affidavit”


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