The Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) plays a crucial role in the Indian financial sector by maintaining a centralized registry for various financial activities. One of its key initiatives is the Central KYC Records Registry (CKYCRR), commonly known as CKYC. However, recognizing the need for modernization and enhanced functionalities, CERSAI embarked on a new chapter by launching CKYCRR 2.0: an upgraded KYC repository fit for the rapidly evolving financial landscape in India.
In the following sections, we will explore the details of the CERSAI KYC project
Why are we rebuilding CKYC?
The existing CKYC protocols set up in 2016, while instrumental in streamlining KYC processes, face limitations that necessitated the revamp:
- The Rise of Fintech and Neobanks: The rapid growth of fintech and neobanks has exposed limitations in the current CKYC’s scope. These institutions often cater to diverse customer segments, including gig workers and freelancers, whose KYC data may not be readily available in the existing system. CKYCRR 2.0’s expanded scope, encompassing corporates and other legal entities, can address this gap and facilitate smoother onboarding for these new entrants in the financial landscape.
- Limited Accessibility: Currently, only FIs registered with CERSAI can access KYC data. CKYCRR 2.0 seeks to broaden accessibility by potentially allowing individuals to access and manage their KYC information within the repository, subject to robust security measures and compliance with data privacy regulations.
- Evolving Regulatory Landscape: Regulatory bodies are emphasizing the need for a “single-source-of-truth”, risk-based KYC approach. The current CKYC system adopts a “one-size-fits-all” approach, which can be inefficient and cumbersome for low-risk individuals. CKYCRR 2.0’s flexible framework and risk-based KYC capabilities can address this concern, tailoring verification requirements based on individual/entity risk profiles.
- Lack of Flexibility: The existing system’s structure restricts the inclusion of additional data points beyond mandatory KYC details. CKYCRR 2.0 envisions a flexible framework that can accommodate future data requirements, such as non-traditional financial data with customer consent, to create a more robust risk assessment framework.
- The emergence of hacks & scams: Over the last few years there have been numerous instances of CKYC data being manipulated, resulting in identity fraud and monetary losses for individuals and organizations.
These factors necessitated the push towards a more secure, modern approach to CKYC.
CKYCRR 2.0: A Vision for the Future
CERSAI’s CKYCRR 2.0 takes shape as a secure, efficient, and user-friendly platform catering to the evolving needs of the financial sector and individuals. Here’s a glimpse into its key features:
- Enhanced Data Management: CKYCRR 2.0 leverages advanced data management techniques to ensure information accuracy, consistency, and easy retrieval. This includes leveraging blockchain technology for its inherent immutability and security, fostering greater trust and transparency within the system.
- Streamlined Processes: The new repository aims to simplify and automate data submission and retrieval processes. FIs can expect seamless integration with existing systems, reducing administrative burdens and enhancing overall efficiency.
- Risk-Based KYC: CKYCRR 2.0 introduces the concept of risk-based KYC, tailoring verification requirements based on individual/entity risk profiles. This approach minimizes unnecessary burdens on low-risk profiles while maintaining robust KYC procedures for high-risk categories.
The Benefits of CKYCRR 2.0
The revamped KYC repository offers a plethora of benefits for both individuals and the financial ecosystem:
- Enhanced Security and Privacy: CKYCRR 2.0 prioritizes data security and privacy by employing state-of-the-art encryption techniques, access controls, and stringent compliance with data protection regulations. Additionally, allowing individuals to manage their KYC information fosters greater control and transparency. This will also help in early detection and prevention of identity fraud.
- Improved Financial Inclusion: Easier access to KYC information can streamline onboarding processes and facilitate financial inclusion, particularly for individuals who previously faced challenges due to cumbersome KYC procedures. This opens doors to a wider range of financial products and services, empowering individuals and contributing to economic growth.
- Empowerment for Individuals: CKYCRR 2.0 empowers individuals by granting them the ability to access, manage, and share their KYC information with authorized FIs, subject to their consent. This fosters greater control over personal data and promotes transparency in financial dealings.
- Innovation and Competition: A robust and efficient KYC infrastructure facilitates the development of innovative financial products and services. This fosters competition within the financial sector, ultimately leading to a wider range of options and improved services for individuals and businesses.
- Reduced Costs and Improved Efficiency: The streamlined processes and enhanced accessibility within CKYCRR 2.0 lead to reduced administrative costs for both FIs and individuals. Additionally, improved efficiency in KYC processes translates to faster loan approvals and quicker access to financial services.
Implementation Roadmap
The CERSAI KYC (CKYCRR 2.0) transformation project will follow a phased implementation, with tentative timelines as follows:
- Phase 1 (12-18 months): This initial phase focuses on upgrading the core infrastructure of the repository and implementing enhanced security protocols. Additionally, it involves developing the framework for incorporating data from corporates and other legal entities.
- Phase 2 (18-24 months): The second phase pilots risk-based KYC and explores the potential for integrating non-traditional financial data with user consent. Additionally, pilot programs are initiated to test individual access and management functionalities within the repository.
- Phase 3 (24-36 months): The final phase focuses on the nationwide rollout of CKYCRR 2.0, ensuring seamless integration with existing FI systems and establishing robust grievance redressal mechanisms. This phase also involves raising public awareness about the new system and its benefits.
Method of Implementation
The successful implementation of CKYCRR 2.0 requires a collaborative effort from various stakeholders:
- CERSAI: As the lead agency, CERSAI takes responsibility for planning, managing, and overseeing the entire process. This includes establishing technical standards, collaborating with stakeholders, and ensuring compliance with regulations.
- Financial Institutions (FIs): FIs actively participate in the development and testing phases, providing valuable feedback and ensuring smooth integration with their existing systems.
- Technology Providers: Technology firms play a crucial role in developing and implementing the technical infrastructure for the new repository, ensuring security and scalability.
- Regulators: Regulatory bodies provide guidance and oversight throughout the process, ensuring compliance with data privacy regulations and the overall effectiveness of the system.
Conclusion
CERSAI’s initiative to rebuild the KYC repository marks a significant step towards a more secure, efficient, and inclusive financial ecosystem in India. By addressing the limitations of the existing system and embracing innovative technologies, CKYCRR 2.0 paves the way for a future where individuals have greater control over their data, FIs can operate with enhanced security and efficiency, and the financial sector as a whole thrives on innovation and competition. The success of CKYCRR 2.0 hinges on collaboration between CERSAI, financial institutions, technology providers, and individuals.