CDSL Ventures Ltd (CVL), a fully-owned subsidiary of the Bombay Stock Exchange (BSE)-promoted Central Depository Services, on Wednesday become the first KYC Registration Agency (KRA) in the country. The market regulator has made the KRA system mandatory for all client accounts opened from January 1.
A KRA is a Sebi-registered agency that centrally maintains KYC (know-your-client) records of investors on behalf of stock brokers and other intermediaries.
Investors opening new accounts with brokers will have to complete the KYC formalities only once, which will get uploaded to a KRA. In future if the investor changes the broker, the latter can retrieve the information from a KRA, unlike on Wednesday, where an investor needs to undergo the entire KYC process once again. It will also benefit intermediaries or brokers, as it will save the back office and employee cost of maintaining KYC documents in physical form.
“Intermediaries will benefit, as the KYC documents would be stored centrally with the KRA, which would bring down the storage cost, as these documents need to be preserved for 10 years,” said Cyrus Khambata, managing director, CVL.
Already, about 300 intermediaries have empanelled with CVL, which will perform the initial KYC of its clients and upload the details in the KRA system.
Khambata said CVL would charge Rs 35 to intermediaries for a single KYC request. Meanwhile, KYC registration will be free for investors. There will not be any monetary incentive to intermediaries for uploading a KYC information with a KRA.
“Once the KRA system stablises for Sebi, we will ask more financial sector regulators to implement the same. Sebi has already initiated preliminary talks with the regulators but everybody has their own requirements,” said Sebi chairman U K Sinha at the inauguration of CVL’s KRA initiative.
Sinha said the KRA initiative was aimed at easing investor experience. “Earlier, the KYC process was a major irritant for investors.”
Sinha said Sebi was keen to have multiple KRAs. “There is no ceiling beyond which we won’t permit KRAs. But going by the competition, there won't be too many KRAs,” he said.
NSDL, promoted by the National Stock Exchange, is also in the process of setting up a KRA.
Experts believe the KRA business might get a push once it is made mandatory for existing clients as well. At present existing clients can continue to transact with intermediaries through an already undergone KYC process.