Sebi working to set up centralised KYC system: Tuhin Kanta Pandey

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Markets regulator Sebi is actively working with the Ministry of Finance and other financial regulators on setting up a centralised KYC (Know Your Customer) system, chairman Tuhin Kanta Pandey has said.

The Central KYC is an online database that maintains KYC records of customers in a centralised manner, aiming to streamline compliance across financial institutions.

When asked about the common KYC system, Pandey told PTI, "Yes, I think we will move forward on that also. We're really trying to have a system which will be very, very effective."  He added that the finance secretary is chairing the committee responsible for this initiative, and efforts are underway to expedite the process.

While no definitive timeline was shared, Pandey expressed optimism, saying, "It should be done quite early." 

  To illustrate the effectiveness of current systems, he cited the robust KRA (KYC Registration Agency) system. "This system is right now very effective where you do one KYC and then, everywhere it is really being done," he noted.

He emphasised that it is not merely an uploading mechanism but a thoroughly authenticated system. All six KRAs are currently interlinked, enabling seamless data retrieval.

Finance Minister Nirmala Sitharaman, in her Budget speech, announced that a new, revamped central Know Your Customer (KYC) registry will be rolled out in 2025. Following this, in April, Financial Services Secretary M Nagaraju chaired a meeting to discuss the revamp of the Central KYC Records Registry and address key issues related to KYC compliance to facilitate easier access to financial services.

On another front, Pandey addressed the issue of same-day (T+0) trade settlements. He clarified that T+0 will remain optional for now, stating, "T+0 is actually an optional thing. It was intended to be optional." This flexibility allows market participants to gradually adapt to the new system.

On technology, he highlighted Sebi's use of artificial intelligence (AI) in enhancing regulatory processes. AI is currently being leveraged for surveillance and faster processing of IPO documents, and its applications are expanding into supervisory technology (sup-tech) and beyond. "And increasingly, it will be used for many other uses," he said.

Elaborating further on Sebi's AI-powered surveillance capabilities, Pandey explained that the tools continuously monitor online platforms to detect unauthorised advisory services. Through collaboration with social media platforms, Sebi has successfully taken down over 70,000 fraudulent investment handles and misleading posts.

However, he also cautioned about the inherent risks of AI. He pointed to concerns around algorithmic trading and the extent to which machines and algorithms might impact the trading and settlement system.

"AI has both sides," he said, adding there is a need for responsible AI development and implementation to mitigate such risks.