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kyc and cluster financing. this project tells about what are the documents require for cluster financing.
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Prof. MS. Neeti Matur
Ananya bose (P001316CMG413)
Jangiti Balaji (P001316CMG438)
Jhansi Hanumanthu (P001316CMG441)
Kiruba Devi R (P001316CMG444)
Mondru Ramesh (P001316CMG455)
Words are inadequate to express the overwhelming sense of gratitude and humble regards to our supervisor MS.NEETI MATUR for his constant motivation, support, expert guidance, constant supervision and constructive suggestion for the submission of our progress report of project work “KYC AND CLUSTER FINANCING”.
We also thank all the teaching and non-teaching staff for their nice cooperation to the students. This report would have been impossible if not for the perpetual moral support from our friends and group members. We would like to thank them all.
KYC means “ Know Your Customer ”. It is a process by which banks obtain information about the identity and address of the customers. ... The KYC procedure is to be completed by the banks while opening accounts. Banks are also required to periodically update their customers' KYC details. (KYC) is the process of a business identifying and verifying the identity of its clients. The term is also used to refer to the bank and anti-money laundering regulations which governs these activities. Know your customer processes are also employed by companies of all sizes for the purpose of ensuring their proposed agents, consultants, or distributors are anti- bribery compliant. Banks, insurers and export creditors are increasingly demanding that customers provide detailed anti-corruption due diligence information. KYC means “Know Your Customer”.
It is a process by which banks obtain information about the identity and address of the customers
For the purposes of a KYC policy, a Customer/user may be defined as:
a person or entity that maintains an account and/or has a business relationship with the bank;
one on whose behalf the account is maintained
beneficiaries of transactions conducted by professional intermediaries such as Chartered Accountants, or solicitors, as permitted under the law or
any person or entity connected with a financial transaction which can pose significant reputational or other risks to the bank, for example, a wire transfer or issue of a high- value demand draft as a single transaction
Why Is KYC Important?
KYC is important because it helps the banker to ensure that the application and other details are real. There have been instances of fraud and siphoning off of money from accounts. By ensuring the identity of individuals, it would help to prevent fraud. The Know Your Customer practice has been in vogue for many years now. It is a must and all individuals have to comply, if they wish to open account. It is not possible to open a back account or account for mutual funds without KYC compliance.
The objective of the KYC is to identity theft, prevent terrorist financing, money laundering and financial fraud. KYC allows us to understand the customer better and manage risks prudently. KYC collects and verifies basic details of the customers like:
Name and authorized signatures Legal status of the legal entity or a person Identity of the beneficial controllers and owners of the account
Regulatory: In terms of the guidelines issued by the Reserve Bank of India (RBI) on 29th November 2004 on Know Your Customer [KYC] Standards – Anti Money Laundering [AML] Measures, all banks are required to put in place a comprehensive policy framework covering KYC Standards and AML Measures.
Legal: The Prevention of Money Laundering Act, 2002 (PMLA) which came into force from 1st July, 2005 (after “rules” under the Act were formulated and published in the Official Gazette) also requires Banks, Financial Institutions and Intermediaries to ensure that they follow certain minimum standards of KYC and AML as laid down in the Act and the “rules” framed there under.
The objectives of KYC guidelines is to prevent banks from being used, intentionally or unintentionally, by criminal elements for money laundering activities. Related procedures also enable banks to better understand their customers and their financial dealings. This helps them manage their risks prudently. Banks usually frame their KYC policies incorporating the following four key elements:
Customer Acceptance Policy; Customer Identification Procedures; Monitoring of Transactions Risk Management
1. Customer Acceptance Policy
The following Customer Acceptance Policy indicating the criteria for acceptance of customers shall be followed in the bank. The branches shall accept customer strictly in accordance with the said policy: i.No account shall be opened in anonymous or fictitio us/benami name(s) ii.Parameters of risk perception shall be clearly defi ned in terms of the nature of business activity, location of customer and his clients, mode of payments, volume of turnover, social and financial status etc., to enable categorization of customers into low, medium and high risk called Level I, Level II and Level III respectively; Customers requiring very high level of monitoring e.g., Politically Exposed Persons.
2. Customer Identification Procedure (CIP)
Customer identification means identifying the person and verifying his/her identity by using reliable, independent source documents, data or information. The branches need to obtain sufficient information necessary to establish, to their satisfaction, the identity of each new customer, whether regular or occasional, and the purpose of the intended nature of banking relationship. Being satisfied means that the branch Is able to satisfy the competent authorities that due diligence was observed based on the risk profile of the customer in compliance of the extent guidelines in place.
3. Monitoring of Transactions
Continuous monitoring is an essential ingredient of effective KYCprocedures and the extent of monitoring should be according to the risk sensitivity of the account. Branches shall pay special attention to all complex, unusually large transactions and all unusual patterns which have no apparent economic or visible lawful purpose. Transactions that involve large amount of cash inconsistent with the size of the balance maintained may indicate that the funds are being washed’ through the account. High risk accounts shall be subjected to intensive monitoring
4. Risk Management
The bank’s KYC policies and procedures covers management oversight, systems and controls, segregation of duties, training and other related m atters. For ensuring effective implementation of the bank’s KYC polices and procedures, the Branch Managers shall explicitly allocate
External economies:
a) specialized suppliers of raw materials, components and machinery; sector specific skills etc.);
b) Favor the emergence of specialized technical, administrative and financial services
c) Create a conducive ground for the development of inter-firm cooperation and specialization as well as of cooperation among public and private local institutions to promote local production, innovation and collective learning.
Importance of Clusters in the Indian Context
With a contribution of 40% to the country's industrial output and 35% to direct exports, the Small and Medium Industry (SME) sector has achieved significant milestones for the industrial development of India. Within this sector, an important role is played by the numerous clusters that have been inexistence for decades and sometimes even for centuries. India has the richest diversity of clusters. The clusters are categorized as:
The products covered by artisanal clusters include textile, handlooms, handicrafts, woodcrafts, metal and stone crafts, jewellery, leather, pottery & clay, etc.
The industrial clusters include processed food, rice milling, readymade garments, terry towel, wet grinder, engineering, machine tools, hand tools, foundry, brass parts, rubber and pharmaceuticals cluster. There are more than 6500 industrial, artisan and micro enterprise clusters2. These clusters represent the socio economic heritage of India, where some towns or villages are known for a specific product for decades and centuries. It is estimated that these clusters contribute 60% of the manufactured exports from India. The clusters in India are estimated to have a significantly high share in employment generation.
Cluster Development Initiatives in India
Several institutions in India have taken up Cluster Projects besides various government initiatives. They have been involved in promoting Small-Scale and Cottage Industries, and Regional Cluster Development by removing policy impediments; financial support; technology, skills and quality upgrading; market support and improving links between small and large firms. Some of the institutions working in this area are:
Central Government
Industrial units/business units in different part of the country concentrated in a particular geographical area is generally treated as clusters. To finance these clusters the Bank is having competitive & attractive cluster schemes. The salient features of the cluster schemes are as under:
