In a recent directive issued by the concerned postal authorities, it has been clarified that physical verification of address is no longer required for depositors classified as “High Risk” (Category 3), specifically those making deposits above Rs. 10 lakh, at Post Offices. This decision seeks to streamline the account opening process and minimize delays that have been causing inconvenience to depositors.
Background
The need for physical address verification has been a point of contention, especially in cases where the address of the depositor falls under the jurisdiction of a different Post Office or Postal division. Previously, depositors looking to invest amounts exceeding Rs. 10 lakh were subjected to this physical verification process, which, in turn, led to substantial delays. These delays resulted in customer complaints and possible monetary loss for depositors due to missed opportunities or transaction delays.
The issue has come under scrutiny after reports of various divisions continuing this practice, despite recent changes in regulatory guidelines. To resolve this, the postal authorities have referred to various past orders to clarify the current position.
Key Regulatory Changes
Three significant SB (Savings Bank) Orders form the backbone of the guidelines on Know Your Customer (KYC), Anti-Money Laundering (AML), and Combating the Financing of Terrorism (CFT) norms. These orders are:
- SB Order No. 18/2010 dated 24.08.2010
- SB Order No. 14/2012 dated 09.10.2012
- SB Order No. 12/2023 dated 25.05.2023
The first two orders (18/2010 and 14/2012) contain provisions related to physical address verification. Specifically, SB Order No. 18/2010 (issued in 2010) provided a clear directive regarding the necessity of physical verification of address, particularly for high-risk customers (those making deposits above Rs. 10 lakh). This requirement was later relaxed under SB Order No. 12/2023, which supersedes all earlier orders and clarifies that for high-risk customers, physical verification of address is no longer mandatory.
Key Points from SB Orders
- SB Order 18/2010 (2010): This order categorized customers into three groups based on the amount of investment: Category 1 (up to Rs. 50,000), Category 2 (Rs. 50,000 to Rs. 10 lakh), and Category 3 (over Rs. 10 lakh). It mandated physical verification of address through official entities such as the State Government, Gram Panchayat, Postman, GDS, PRI, SDI, or MO.
- SB Order 14/2012 (2012): This order omitted the clause requiring physical address verification for customers in the High-Risk Category (Category 3), which aligns with the current position in SB Order 12/2023.
- SB Order 12/2023 (2023): This most recent order, issued in May 2023, supersedes all previous instructions and provides the latest clarification. It explicitly states that physical verification of address for High-Risk Category customers is no longer necessary. Instead, proof of the source of funds is sufficient for account opening.
Implications of the New Guidelines
The current rules emphasize that physical address verification is not a mandatory step for High-Risk customers who deposit amounts exceeding Rs. 10 lakh. This change significantly reduces the administrative burden on Post Offices and expedites the account opening process, particularly for depositors whose addresses fall under the jurisdiction of different divisions.
The revised guidelines encourage Post Offices to focus on due diligence regarding the depositor’s identity, ensuring that KYC information is properly updated in the CBS (Core Banking System) Finacle. Additionally, proof of the source of funds must be collected for such high-value deposits. This approach is in line with modern KYC and AML norms, balancing ease of account opening with the need to prevent financial crimes.
Steps Forward
All Post Offices are expected to implement these changes immediately to ensure a smooth and efficient process for high-value depositors. A compliance report is required to be submitted by December 10, 2024, confirming the dissemination of these new instructions to all relevant offices.
The aim is to enhance customer satisfaction by removing unnecessary bureaucratic hurdles while ensuring that proper security measures are still in place to combat illegal activities such as money laundering. By eliminating the need for physical address verification, the Post Offices will not only improve efficiency but also provide a more customer-friendly experience.
The latest directive by the postal authorities is a significant step toward modernizing the account-opening process for high-value depositors. By eliminating the need for physical address verification, the Post Offices are aligning with contemporary regulatory norms, making the process faster and more efficient. At the same time, the emphasis on updated KYC and the verification of the source of funds ensures that the security of financial transactions is maintained.