That could change with the rollout of Central KYC (CKYC) 2.0 from August 1, as banks and insurers begin moving towards a consent-based system that allows verified KYC information to be reused across financial institutions. Mutual funds, brokers and other market intermediaries are expected to join the framework in phases.
The objective is to create a common identity verification layer across the financial ecosystem, but experts say the transition will require institutions to address data, technology and regulatory challenges.
What customers will see differently
Under CKYC 2.0, customers will no longer need to start the KYC process from scratch every time they approach a new financial institution.
Manoj Puravanakara, Group COO, Atom Financial Services, an integrated global financial services firm, says the new system changes KYC from a repeated document submission exercise into a consent-based verification process.
Once a customer’s KYC record is available on the central registry, the individual can share the 14-digit CKYC identifier and approve access through OTP-based consent. The institution can then retrieve the verified record instead of collecting the same identity documents again.
For customers managing multiple banking, insurance or investment relationships, this could reduce the need to upload documents repeatedly and simplify onboarding across financial products.
KYC becomes reusable, but product checks remain
While CKYC 2.0 addresses repeated identity verification, it does not eliminate all onboarding requirements.
Prashant Mishra, Founder and CEO, Agnam Advisors, a SEBI-registered, fee-only investment advisory firm and multi-family office, says customers should distinguish between identity verification and product-level compliance.
“CKYC settles identity. It does not settle FATCA declarations, nomination, risk profiling, bank mandates or product suitability,” he says.
This means customers may still need to provide additional details depending on whether they are opening a bank account, buying insurance or investing in a financial product.
Existing customers may not need fresh KYC
Customers with valid KYC records do not need to immediately redo the process after the new framework goes live.
A key feature of CKYC 2.0 is the introduction of a confidence score for KYC records, which indicates the quality of verification carried out earlier.
Puravanakara says this could help institutions assess whether an existing record is sufficient or whether additional checks are required.
Why financial institutions expect efficiency gains
For financial institutions, CKYC 2.0 could reduce duplication in customer verification and lower operational costs associated with maintaining separate KYC records.
Anshul Agrawal, Chief Technology Officer, Branch International, a mobile-first financial technology company, says digital-first institutions have already seen benefits from using CKYC frameworks, with a significant portion of customer verification journeys being completed through the central KYC system.
He says the expanded framework could help create a more connected verification ecosystem by reducing repeated checks across banks, insurers and investment providers.
Data quality is the biggest transition challenge
While the new system aims to simplify KYC, experts say the initial phase could involve operational hurdles.
Prashant Mishra points to data quality as one of the biggest challenges, with existing records potentially carrying duplicate entries, name mismatches or outdated mobile numbers.
Since customer approval under CKYC 2.0 relies on OTP authentication, incorrect mobile details could interrupt the verification process and require additional intervention.
Manoj Puravanakara adds that institutions will have to upgrade their onboarding infrastructure, move towards real-time API-based verification and restructure older KYC records to work with the new framework.
Privacy and interoperability remain key concerns
As more financial institutions gain access to a common KYC database, experts say data security and regulatory alignment will become critical.
Hitesh Agrawal, Founder & Managing Director, Them Consulting, a global UI/UX design and product development company, says CKYC 2.0 is not just a technology upgrade but requires changes across customer databases, onboarding systems and compliance processes.
He says institutions will need stronger access controls, audit trails and secure API frameworks to ensure customer data is accessed only with proper consent.
Another challenge is bringing different financial sectors onto a common framework. Banks, insurers, mutual funds and brokers have historically followed different KYC processes under different regulators.
Agrawal says aligning data standards and acceptance criteria across RBI, SEBI and IRDAI-regulated entities will be important for the system to deliver a seamless experience.
Insurance sector expects smoother onboarding
Insurers are also preparing for the rollout of the upgraded framework.
Girish Sehgal, Chief – Health Underwriting & Claims, Customer Service & Operations, ICICI Lombard, a private-sector general insurance company, says OTP-based consent and the use of PAN and mobile number as primary identifiers can improve transparency and reduce manual intervention in insurance onboarding.
However, he adds that adoption will determine how quickly the benefits become visible across the sector.
