KYC routine did not kill-the-customers

KATHMANDU, JUNE 27:

More than half a million new bank accounts were opened after the central bank introduced stringent ‘Know-Your-Customers’ (KYC) routine, dispelling fears that the provision would deter depositors.

The number of bank accounts in financial institutions has grown by more than half a million since December 2012 — from the time when Nepal Rastra Bank (NRB) imposed stringent KYC requirements.

Back in December, the central bank had asked financial institutions to make their depositors fill up a new KYC form that required depositors to give details of their next of kin which was not well-received by banks and account holders as well. Though at that time many bankers had dubbed the new KYC routine as ‘Kill-Your-Customer’, it has become a blessing in disguise for some.

“After KYC forms were introduced, more depositors have been found to be switching banks based on interest rates and services being provided,” said vice president of Nepal Bankers’ Association Upendra Poudel.

By mid-December, 2012, the total number of deposit account holders in commercial banks, development banks and finance companies stood at 10.49 million. The number of deposit accounts has reached 11.02 million as of mid-April, according to NRB statistics.

In the past four months, more than 530,000 new bank accounts were opened, despite the cumbersome KYC forms to be filled. On the other hand, in the period of eight months — between mid-April 2012 to mid-December 2012 — 690,000 new bank accounts were opened.

All the banks had asked their account holders to update their information in compliance with NRB’s directive. The KYC forms, based on Anti Money Laundering and Combating Finance to Terrorism regulations, require detailed information of the account holder including citizen certificate numbers and issue date among others of the

kin including that of grandparents, parents, sons, daughters and daughters-in-law. Likewise, the banks also required proof of address or details of landlords.

“Since depositors have to go through the same procedure as in opening new accounts, they rather sought banks that offered better interests instead of sticking with the old ones,” said Poudel, who is also CEO of NMB Bank.

NRB now has simplified the requirements for account holders with deposits less than Rs 500,000. Small depositors do not need to mention citizenship certificate numbers of family members and next of kin — only names will suffice.

“Remittance account holders are in the most difficulty as Nepalis living abroad do not have access to documents that are required to fill the KYC form,” informed Poudel.

According to bank account statistics, about 41 per cent of the total population have deposit accounts in formal financial institutions. However, in reality, more than half the population is financially excluded.

According to World Bank’s Global Findex Database that studies the state of financial inclusion among 148 countries, in Nepal only 25.3 per cent of adults save in the formal financial service system including any kind of bank, microfinance institution or cooperative. The study has found that one half of the world population does not have formal bank accounts.

“Recognising that stringent KYC norms could deter possible depositors —especially in rural areas — NRB simplified the requirement for small depositors,” said spokesperson of NRB Bhaskar Mani Gyanwali. Worldwide, the high cost to maintain an account, physical distance and lack of proper documents required to open an account are recognised as barriers to opening a deposit account.

Source: THT