Client Onboarding — KYC, CKYC and PMLA

Before executing any trade, a broker must complete Know Your Customer (KYC) under the PMLA Rules 2005 and SEBI master circular. Central KYC (CKYC) maintains a s...

Definition

KYC + CKYC Framework

Before executing any trade, a broker must complete Know Your Customer (KYC) under the PMLA Rules 2005 and SEBI master circular. Central KYC (CKYC) maintains a single record across all financial intermediaries. Key documents: PAN (mandatory), Aadhaar for proof of address, bank proof, income proof (for F&O), photograph, signature. Records retained for 5 years.

In Simple Words

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PAN is mandatory for every securities-market account since 2010. Aadhaar-based e-KYC is the fastest — offline or online OTP-based. Officially Valid Documents (OVD) for address: Aadhaar, passport, driving licence, voter ID, NREGA job card, letter from Government. Additional OVDs for address (if OVD doesn't have current address): utility bill (≤ 2 months old), property tax receipt (≤ 3 months), PPO, employer allotment letter. Risk categorisation: Low / Medium / High based on profile, geography and product. High-risk clients require enhanced due diligence (EDD). CKYC removes duplication — once a customer is KYC-verified at any SEBI intermediary, the CKYC ID can be referenced by any other.

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PAN = Universal ID

Mandatory for every Indian financial account

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CKYC = One KYC

Shared record across banks, brokers, MFs, insurance

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OVD

6 officially valid documents for identity + address

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EDD for High Risk

PEPs, high-cash profiles, cross-border

Real-Life Scenario

A Practical Example

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Ravi

Real-Life Scenario

Ravi opens a Zerodha account:
1. Aadhaar-based e-KYC + OTP → identity + address in 2 min
2. PAN verification via Income Tax DB → name match
3. Bank account link + 1-rupee verification
4. In-Person Verification (IPV) via live video
5. Nominee declaration, F&O risk disclosure, product suitability
6. Zerodha sends KYC pack to CKYC registry → CKYC-ID issued
7. Zerodha can now enable cash-segment trading. For F&O enablement: income proof + derivatives risk disclosure document needed separately.

Key Points to Remember

What Makes This Important

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PAN mandatory for all securities accounts

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OVD for identity + address: Aadhaar, passport, DL, voter ID, NREGA, Govt letter

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CKYC = Central KYC registry — one-time KYC across all financial intermediaries

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Records retained 5 years post-account-closure (PMLA Rule 10)

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Risk categorisation: Low / Medium / High

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In-Person Verification (IPV) mandatory — video / physical

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F&O requires additional income proof + risk disclosure

FAQs

Frequently Asked Questions

Yes — Aadhaar is optional. You can use any other Officially Valid Document (passport, voter ID, driving licence, NREGA job card, Govt letter) for address proof. PAN, however, is mandatory.

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