Shiksha Financial Services (India) Private Limited, a Private Limited Company incorporated under the Companies Act, 1956 and having registered with Reserve Bank of India (RBI) and currently classified as a Non-Systematically Important Non-Deposit Accepting Non-Banking Financial Company (NBFC), is engaged in the business of lending to schools (School Loans) and students (Student Loans).
The lending consists of short, medium and long term with different maturity patterns and varying rates of interest. The Management of the Company and the Board of Directors acknowledging the same, are of the view that constant monitoring and managing the assets and liability are a necessity. Further it is a statutory obligation on part of the Company to have an effective Know Your Customer (KYC) system as part of their overall system for effective Risk Management.
The KYC policy shall include following four key elements:
(a) Customer Acceptance Policy;
(b) Risk Management;
(c) Customer Identification Procedures (CIP); and
(d) Monitoring of Transactions
Compliance with KYC Policy
(i) Specifying as to who constitute ‘Senior Management’ for the purpose of KYC compliance.
(ii) Allocation of responsibility for effective implementation of policies and procedures.
(iii) Independent evaluation of the compliance functions of the Company’s policies and procedures, including legal and regulatory requirements.
(iv) Concurrent/internal audit system to verify the compliance with KYC/AML policies and procedures.
(v) Submission of quarterly audit notes and compliance to the Audit Committee.
The above functions shall not be outsourced and in this regard, A “Designated Director” shall benominated and designated by the Board of Directors toensure overall compliance with the obligations imposed under Chapter IV of the PML Act and the Rules made thereunder.
The name, designation and address of the Designated Director shall be communicated to the FIU-IND. In no case, the Principal Officer shall be nominated as the ‘Designated Director’.
Customer Acceptance Policy
The Customer Acceptance Policy shall be formulated and approved by the Board of Directors of the Company. Such Policy shall ensure:
(a) No account is opened in anonymous or fictitious/benami name.
(b) No account is opened where the Company is unable to apply appropriate Customer Due Diligence (CDD) measures, either due to non-cooperation of the customer or non- reliability of the documents/information furnished by the customer.
(c) No transaction or accountbased on relationship is undertaken without following the CDD procedure.
(d) The mandatory information to be sought for KYC purpose while opening an account and during the periodic updation, is specified.
(e) ‘Optional’/additional information, is obtained with the explicit consent of the customer after the account is opened.
(f) REs shall apply the CDD procedure at the UCIC level. Thus, if an existing KYC compliant customer of a RE desires to open another account with the same RE, there shall be no need for a fresh CDD exercise.
(g) CDD Procedure is followed for all the joint account holders, while opening a joint account.
(h) Circumstances in which, a customer is permitted to act on behalf of another person/entity, is clearly spelt out.
(i) Suitable system is put in place to ensure that the identity of the customer does not match with any person or entity, whose name appears in the sanctions lists circulated by Reserve Bank of India or any other statutory authority.
However the Customer Acceptance Policy shall not result in denial of banking/financial facility to students, parents/ guardians of the students, association or trust or organising running schools and education centres amongst others involved in similar business and especially those, who are financially or socially disadvantaged.
The Company has a risk-based approach and in this regard:
Customers shall be categorised as low, medium and high-risk category, based on the assessment and risk perception. Risk categorisation shall be undertaken based on parameters including but not limited to
- customer’s identity, social/financial status,
- nature of business activity,
- information about the clients’ business and their location
- information about the clients employment etc.
While considering customer’s identity, the ability to confirm identity documents through online or other services offered by issuing authorities may also be factored in. Provided that various other information collected from different categories of customers relating to the perceived risk, is non-intrusive and the same is specified in the KYC policy.
Customer Identification Process
Customer Due Diligence For Individuals
The following information from an individual while establishing an account based relationship or while dealing with the individual who is a beneficial owner, authorised signatory or the power of attorney holder related to any legal entity:
From an individual who is eligible for enrolment of Aadhaar, the Aadhaar number; the Permanent Account Number (PAN) or Form No. 60 as defined in Income-tax Rules, 1962, as amended from time to time;
Incase of non-applicability of Aadhar, A declaration to the effect of individual not being eligible for enrolment of Aadhaar may be obtained by the Company.
Provided, where an Aadhaar number has not been assigned to an individual, proof of application of enrolment for Aadhaar shall be obtained wherein the enrolment is not older than 6 months and in case PAN is not submitted, certified copy of an OVD containing details of identity and address and one recent photograph shall be obtained.
“Explanation- Obtaining a certified copy by reporting entity shall mean comparing the copy of officially valid document so produced by the client with the original and recording the same on the copy by the authorised officer of the reporting entity”
Provided further, that from an individual, who is a resident in the State of Jammu and Kashmir or Assam or Meghalaya, and who does not submit Aadhaar or proof of application of enrolment for Aadhaar, the following shall be obtained: i. certified copy of an OVD containing details of identity and address and ii. one recent photograph b) From an individual who is not eligible to be enrolled for an Aadhaar number, or who is not a resident, the following shall be obtained:
PAN or Form No. 60 as defined in Income-tax Rules, 1962, as amended from time to time. ii. one recent photograph and iii. A certified copy of an OVD containing details of identity and address. Provided that in case the OVD submitted by a foreign national does not contain the details of address, in such case the documents issued by the Government departments of foreign jurisdictions and letter issued by the Foreign Embassy or Mission in India shall be accepted as proof of address.
Aadhar Based Account Opening, e-KYC, OTP based verification to be discussed and included.
KYC verification once done by one branch/office of the RE shall be valid for transfer of the account to any other branch/office of the same RE, provided full KYC verification has already been done for the concerned account and the same is not due for periodic updation.
Customer Due Diligence For Legal Entities
For a Company: certified copies of each of the following documents shall be obtained:
- Certificate of incorporation
- Memorandum and Articles of Association
- A resolution from the Board of Directors and power of attorney granted to its managers, officers or employees to transact on its behalf.
- Identification information as mentioned in the above paragraph in respect of managers, officers or employees holding an attorney to transact on its behalf.
For a partnership firm, certified copies of each of the following documents shall be obtained:
- Registration certificate.
- Partnership deed.
- Identification information as mentioned above in respect of the person holding an attorney to transact on its behalf.
For opening an account of a trust, certified copies of each of the following documents shall be obtained:
- Registration certificate.
- Trust deed.
- Identification information as mentioned above in respect of the person holding a power of attorney to transact on its behalf.
For opening an account of an unincorporated association or a body of individuals, certified copies of each of the following documents shall be obtained:
- resolution of the managing body of such association or body of individuals;
- power of attorney granted to transact on its behalf;
- Identification information as mentioned above in respect of the person holding an attorney to transact on its behalf and
- such information as may be required by the RE to collectively establish the legal existence of such an association or body of individuals.
Explanation: Unregistered trusts/partnership firms shall be included under the term ‘unincorporated association’.
Explanation: Term ‘body of individuals’ includes societies. 33A For opening accounts of juridical persons not specifically covered in the earlier part, such as Government or its Departments, societies, universities and local bodies like village panchayats, certified copies of the following documents shall be obtained:
- Document showing name of the person authorised to act on behalf of the entity;
- adhaar/ PAN/ Officially valid documents for proof of identity and address in respect of the person holding an attorney to transact on its behalf and
- Such documents as may be required by the RE to establish the legal existence of such an entity/juridical person.
- Ongoing Due Diligence and Periodic Updation
Periodic updation shall be carried out at least once in every two years for high-risk customers, once in every eight years for medium risk customers and once in every ten years for low-risk customers as per the following procedure:
- maintain all necessary records of transactions between the Company and the customer, both domestic and international, for at least five years from the date of transaction;
- preserve the records pertaining to the identification of the customers and their addresses obtained while opening the account and during the course of business relationship, for at least five years after the business relationship is ended;
- make available the identification records and transaction data to the competent authorities upon request;
- introduce a system of maintaining proper record of transactions prescribed under Rule 3 of Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (PML Rules, 2005);
- maintain all necessary information in respect of transactions prescribed under PML Rule 3 so as to permit reconstruction of individual transaction, including the following:
- the nature of the transactions;
- the amount of the transaction and the currency in which it was denominated;
- the date on which the transaction was conducted; and
- the parties to the transaction.
- evolve a system for proper maintenance and preservation of account information in a manner that allows data to be retrieved easily and quickly whenever required or when requested by the competent authorities;
- maintain records of the identity and address of their customer, and records in respect of transactions referred to in Rule 3 in hard or soft format.
Sharing KYC information with Central KYC Records Registry (CKYCR)
The Company shall capture the KYC information for sharing with the CKYCR in the manner mentioned in the Rules, as required by the revised KYC templates prepared for ‘individuals’ and ‘Legal Entities’ as the case may be. Government of India has authorised the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI), to act as, and to perform the functions of the CKYCR vide Gazette Notification No. S.O. 3183(E) dated November 26, 2015.