In 2004, RBI came out with recommendations whereby it instructed the banks to frame out their own KYC (Know Your Customers) policies. Banks are expected to ensure full compliance before end-December 2005. Though such compliances create challenges for banks with regard to profitability, technology etc., benefits are also huge like reputation building, gain of trust and respect of customers, employees, business associates and society at large.

After Money Laundering Act 2002 was passed , `KYC' i.e., `Know Your Customer' guidelines were issued by the Reserve Bank of India in August 2002 as an anti-money laundering measure to ensure that banks/financial institutions of the country have robust systems in place to prevent criminals from using the banking channels as a medium of money laundering.

KYC is regarded as an important tool in the fight of society and government against financial frauds and criminal activities which expose banks to various risks such as operational risk, reputation risk, compliance risk and legal risk.

Boards are also expected to ensure full compliance of the instructions before end December 2005. As the deadline is just near, boards of various banks have already suitably instructed their branches and other operating functionaries to comply with the instructions of the RBI.

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