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What is e-KYC for a personal loan?

Applying for a personal loan in India is very easy, thanks to relaxed laws and simpler personal loan eligibility criteria. However, despite all the ease and quicker processes, you still need to have the correct set of documents when you apply for a personal loan.

The required set of personal loan documents needed by a bank or NBFCs can differ, but you will find that all of them will ask you to perform an e-KYC (if you are applying for an instant personal loan online). In this blog, we will help explain what an e-KYC is and how you can successfully provide all the KYC related documents to get your personal loan application approved quickly. 

What is e-KYC? Is it mandatory?

e-KYC is the electronic process of verifying the identity of a customer digitally. This method eliminates the need for physical documentation and in-person verification, making the process faster and more convenient. To complete your e-KYC in India, you will have to provide your Aadhaar card number, to authenticate and verify your identity.

Read more: Get a personal loan without security

How does the e-KYC process work?

The e-KYC process involves the following steps:

The customer provides consent

The process begins with obtaining the customer’s consent for e-KYC. This is crucial as it ensures that the customer agrees to share their Aadhaar details for verification purposes.

Proceeds with Aadhaar authentication

Once consent is obtained, the customer’s Aadhaar number is used to fetch their identity details from the UIDAI database. This can be done through an OTP-based (One-Time Password) authentication and biometric data (fingerprint).

The data is fetched

Upon successful authentication, the customer’s demographic details (such as name, address, date of birth, gender) and photograph are retrieved from the Aadhaar database.

Verification and onboarding

The retrieved data is then cross verified with the information provided by the customer during the loan application. If the details match, the customer is successfully onboarded, and the loan application is approved.

Read more: How to choose the best personal loan lender?

What are the benefits of going through e-KYC?

Here is why the e-KYC process is so much better than the regular way to get a personal loan:

e-KYC is faster and offers convenience

One of the most significant advantages of e-KYC is the speed at which the verification process is completed. Traditional KYC methods can take days or even weeks, whereas e-KYC can be done in a matter of minutes. This is particularly beneficial for personal loan applicants who often require funds urgently.

e-KYC is paperless

e-KYC eliminates the need for physical documents, reducing the hassle of paperwork. This not only speeds up the process but also reduces the risk of document loss or damage.

e-KYC is cost-effective 

For financial institutions, e-KYC reduces the costs associated with handling, storing, and verifying physical documents. These savings can now be passed on to customers in the form of lower processing fees.

Greater security

It is considered more secure than traditional methods as it makes use of both biometric data and secure OTPs for authentication. This reduces the risk of identity fraud and ensures that the verification process is tamper-proof.

e-KYC also promotes inclusivity

It enables financial institutions to reach a broader customer base, including those in remote areas where physical verification may be challenging. This supports financial inclusion by providing access to credit for underserved populations.

Read more: What are instalment loans? – Types, process & more

What are the guidelines on how e-KYC can be implemented?

The Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) have laid down clear guidelines for the implementation of e-KYC. These regulations ensure that the process is conducted in a secure and standardised manner, protecting the interests of both customers and financial institutions.

Aadhaar based e-KYC

The RBI has permitted the use of Aadhaar-based e-KYC for customer identification, provided that the customer voluntarily submits their Aadhaar details. This method is widely used for quick and efficient verification.

Video KYC

In addition to Aadhaar-based e-KYC, the RBI has also introduced Video-based Customer Identification Process (V-CIP). This allows customers to complete the KYC process through a video call with a bank representative, providing an additional layer of convenience and security.

e-KYC has been a welcome change in the way India gets access to loans. Thanks to its secure and instant verification process, getting personal loans has now become much faster than before. Apply for your personal loan today, complete the e-KYC and make sure to repay your EMIs on time to avoid any extra charges!