Asset creation/Loan utilisation: Belstar provides loans only for the purpose of enterprise creation/strengthening. Belstar ensures that borrowers create enterprises within 15 days of availing the loan.
Belstar Investment and Finance Private Limited, Chennai
Policy on Know Your Customer (KYC) / Anti Money Laundering (AML)
1. Introduction: In terms of the provisions of Prevention of Money Laundering Act, 2002 and the Prevention of Money Laundering (Maintenance of Records) Rules, 2005, Non-Banking Finance Company- Micro Finance Institutions (NBFC-MFIs) as Reserve Bank of India (RBI) Regulated Entities (REs) are required to follow certain customer identification procedure while undertaking a transaction either by establishing an account based relationship or otherwise and monitor their transactions. RBI Master Directions on Know Your Customer (KYC) vide DBR.AML.BC.No.81/14.01.001/2015-16 dated February 25, 2016 (Updated as on 8th July, 2016) provides the guidelines of such a policy to be framed by Belstar Investment and Finance Private Limited (BIFPL). BIFPL is a socially responsible registered Non-Deposit taking NBFC-MFI, which provides collateral-free small loans to women micro-entrepreneurs, who are members of the Self Help Groups(SHGs) / Joint Liability Groups (JLGs) formed by them, with the mission of helping them build and manage their sustainable livelihood. BIFPL will implement such a KYC / AML policy duly approved by its Board of Directors (Board). This Policy will be reviewed by the Board once in a year during the first quarter of each Financial Year.
2. Objective: The objective of this KYC / AML Policy is to prevent BIFPL from being used, intentionally or unintentionally, by criminal elements for money laundering or terrorist financing activities. KYC procedures also enable BIFPL to know / understand its clients and their financial dealings better and manage its risks prudently.
3. Key Elements: The KYC policy shall include following four key elements:
(a) Customer Acceptance Policy; (b) Customer Identification Procedures (CIP); (c) Risk Management and (d) Monitoring of Transactions.
4. Designated Director: The Board nominates the Managing Director of BIFPL as the “Designated Director” whose name, designation and address shall be communicated to the Financial Intelligence Unit- India (FIU-IND) in terms of the aforesaid Directions of RBI.
5. Principal Officer: The Vice President, being the Principal Officer of BIFPL, shall be responsible for ensuring compliance, monitoring transactions, and sharing and reporting information as required under the law/regulations. His name, designation and address shall be communicated to the FIU-IND.
6. Compliance of KYC / ALM policy: BIFPL shall ensure compliance with KYC / ALM Policy through:
(a) The Chief Operating Officer (COO) who as part of the ‘Senior Management’ will be responsible for effective implementation of this policy and procedures thereunder. (b) The Head- Internal Audit who will ensure to verify the compliance with KYC / AML Policies and Procedures. (c) The Chief Risk Officer who as part of the ‘Senior Management’ will be responsible for KYC / ALM compliance including legal and regulatory requirements and submit a quarterly audit note and compliance to the Audit Committee of the Board.
7. Customer Acceptance Policy (CAP): BIFPL will ensure that :
(a) No account is opened in anonymous or fictitious / benami name. (b) No account is opened where BIFPL is unable to apply appropriate Customer Due Diligence (CDD) measures, either due to non-cooperation of the customer or non-reliability of the documents / information furnished by the customer. (c) No transaction or account based relationship is undertaken without following the due CDD procedure. (d) The mandatory information to be sought for KYC / ALM purpose while opening an account and during the periodic updation, is specified. (e) ‘Optional’/additional information is obtained with the explicit consent of the customer during / after the account is opened.
8. Customer Identification Procedure (CIP): BIFPL shall undertake identification of customers/ clients in the following cases:
(a) Commencement of a relationship under which a customer / client applies to avail of the products / services offered by BIFPL. (b) When there is a doubt about the authenticity or adequacy of the customer identification data, it has obtained. (c) In case it is observed that the address mentioned as per ‘proof of addresses’ has undergone a change, BIFPL shall seek and obtain from the customer fresh proof of address within a period of six months. (d) Where a customer categorised as low risk expresses inability to complete the documentation requirements on account of any reason that BIFPL considers to be genuine, and where it is essential not to interrupt the normal conduct of business, BIFPL may complete the verification of identity within a period of six months from the date of establishment of the relationship. (e) Decision-making function of determining compliance with KYC norms lies with the officials of BIFPL.
9. Customer Due Diligence (CDD) Procedure: For Individuals-
(a) As directed periodically by RBI / Micro Finance Institutions Network (MFIN), BIFPL will ensure to verify the ‘Proof of Identity’ and ‘Proof of Address’ of each of its clients at the time of obtaining their applications for availing its products / services. These verifications will be done by obtaining at least 2 KYC IDs for a client from amongst 4 KYC IDs (namely Aadhaar, Voter ID, Ration Card and MNREGA Job Card suggested by MFIN) which are amongst the Officially Valid Documents (OVD) prescribed by RBI. The First (or Primary) KYC ID has to be Aadhaar. A client has to submit her self-attested copy of Aadhaar Card as the mandatory Primary Document as Proof of Identity. She will have to submit her self-attested copy of either Ration Card or Voter ID Card as the Secondary Document as Proof of Address. (b) The field level officials of BIFPL will verify the photocopies of such OVD with the original ones and certify the fact of so verifying those by noting / signing on the photocopies, with their name and designation. (c) The Primary Applicant (prospective Borrower of BIFPL) should provide the following documentary evidence for her KYC. Her Co-Applicant will also provide similar types of documentary evidence / photograph for KYC as those of her.
(i) ID Proof; (ii) Address Proof and (iii) Proof of Age. (d) The required documents shall be obtained as follows. (i) ID Proof- ID proof shall be mandatorily Aadhaar Card. (ii) Address Proof- Either Ration Card or Voter ID Card (iii) Proof of Age- Aadhaar Card (e) Proof of Secondary Applicant- Aadhaar Card and Ration Card or Voter ID card. (f) Additional Documents for enrolment- (i) One recent passport size colour photograph of the Primary Applicant and Co-applicant; (ii) Nominee’s KYC (similar to Primary Applicant) along with one passport size colour photograph and (iii) Nomination form for the purpose of Insurance (applicable if other than secondary applicant). (g) As and when implemented by BIFPL, the e-KYC service of Unique Identification Authority of India (UIDAI) shall be accepted as a valid process for KYC verification as the information containing demographic details and photographs made available from UIDAI as a result of e-KYC process is treated as an ‘Officially Valid Document’ and transfer of KYC data, electronically to BIFPL from UIDAI, will be accepted as valid process for KYC verification. BIFPL can print/download directly, the prospective client’s e-Aadhaar letter from the UIDAI portal or e-KYC procedure as mentioned above shall be adopted, if such a customer knows only her Aadhaar number or if the customer carries only a copy of the e-Aadhaar downloaded from another source.
10. Customer Due Diligence (CDD) Procedure: For SHGs / JLGs-
For identification of a SHG / JLG: (i) Copies of the minutes of the meeting of Self Help Group duly signed by the Chairperson of the meeting / Animator and Representative with seal. (ii) The list of members of the group with their name, Father/Husband‘s name, age, address, telephone / mobile number etc with individual member‘s signature against her name in the minutes book. (iii) Certified copy of Resolution taken in the meeting of the SHG authorizing opening of Savings Bank account with a Bank and loan account with BIFPL (specifying the name, type and style of the said accounts to be opened) and also specifying the names of the Branch of Bank and BIFPL, wherein the accounts are to be opened and conferring authority on the persons, who, in accordance with the resolution are to operate the accounts etc. (iv) As part of CDD, each of the members of SHG /JLG will submit her passport size photograph and Aadhaar Card and Ration Card or Voter ID card. (v) As part of the Loan Documents, the members of a SHG / JLG who intend to borrow from BIFPL will execute an Inter se Agreement Form connoting the joint and several liability of each of the members for the Group in respect of the borrowings by the Group and / or its members. (vi) The Animator and Representative in case of a SHG and the Group Leader in case of a JLG will lead the group in maintaining the group activities, ethos / dynamics in operating their savings / borrowing accounts.
11. Risk Management: For Risk Management, BIFPL shall have a risk based approach which includes the following:
(a) Customers shall be categorised as low, medium and high risk category, based on the assessment and risk perception of BIFPL as per this Policy. (b) Risk categorisation shall be undertaken based on parameters such as customer’s constitution, identity, social / financial status, nature of activity, size of business and their location, sources of funds, level of income / turnover, country of residence / nationality etc. (c) The nature and extent of due diligence will depend on the risk perceived by BIFPL.
12. Customer Risk Categorisation (CRC): The perception of ‘Customer risk' from a MFI's perspective, in this context, refers to the money laundering and terrorist funding risk associated with a particular client . This risk is based on the risk perceptions associated with the parameters comprising a customer's profile, and the level of risk associated with the product and channels being used by him. Customer Risk Profiling is to be done and customers are to be categorized into low, medium and high risk based on defined parameters of risk perception as briefly outlined below:
(a) Customer constitution- Individual, SHGs, proprietorship, partnership, private limited etc (b) Customer Identity- Whether the client’s identity is established beyond doubt. (c) Social / Financial Status- Socially backward or developed, Low Income Group or High Net worth Individual (HNI). (d) Nature of Activity- Agri / Allied Activity , Small enterprise or Large scale Manufacturing / Service industries (e) Size of Business and their Location- Retail or Wholesale Business, whether in small scale or large scale, whether located in rural / semi-urban / urban centre with one location or in multiple locations, etc. (f) Sources of Funds- Own / known source or opaque source of funds and small borrowings or large borrowings. (g) Income / turnover levels- High or medium or low income / turnover levels. (h) Country of Residence / Nationality: Whether Indian or foreign national, whether reside in India or any overseas location.
12.1. High Risk- Based on the aforesaid criteria, clients who are likely to pose a higher than average risk to BIFPL may be categorized as High Risk or Medium Risk. The indicative list of customers in High Risk Category requiring higher due diligence include High Net worth Individuals (HNIs), Non-face to face clients, NRIs / Foreigners, Trusts, NBFCs, Firms with ‘Sleeping Partners’, Companies with Beneficial Ownership, Multilevel Marketing Companies, Politically Exposed Persons(PEPs), Persons with dubious reputation as per public information available, etc.
12.2. Medium Risk- Examples of customers in Medium Risk Category include providers of telecommunications service, internet café, IDD call service, phone cards, phone centre, travel agency etc.
12.3. Low Risk- Customers- individuals and entities- whose identities and sources of funds can be easily identified and transactions in whose accounts by and large conform to the known profile may be categorized as low risk. Illustrative examples of low risk customers include (a) Salaried employees / Pensioners whose salary structures are well defined, (b) People belonging to lower economic strata of the society pursuing micro enterprises and whose accounts show small balances and low turnover, (c) Regulators and statutory bodies (d) Govt Owned Companies / Departments etc.
13. Turnover / Income Criteria for Customer Risk Categorisation-
Credit Summations (Turnover) in the Account of a client in a year representing the Gross Income / Turnover of the constituent has been adopted as one of the criteria for Customer Risk Categorisation. Clients of BIFPL, whose annual business income/ turnover fall within the range as specified hereunder, are to be classified accordingly.
|Customer Type/Constitution||Low Risk - Annual Income/ Turnover||Medium Risk - Annual Income/ Turnover||High Risk - Annual Income/ Turnover|
|Individuals / SHGs /JLGs||Upto and inclusive of Rs.10 lakhs||Above Rs.10 lakhs but upto and inclusive of Rs.50 lakhs||Above Rs. 50 lakhs|
14. Clients of BIFPL- All clients of BIFPL can be categorised as Low Risk Customers because
(i) all of them are women and Indian nationals; (ii) their identity and residence address are established respectively from their Aadhaar card and Ration Card or Voter ID card and also from personal visits by officials of BIFPL; (iii) they belong to the lower socio- economic strata whose annual household income in rural areas and in semi-urban / urban areas do not exceed Rs1 lakh and Rs1.6 lakh respectively; (iv) all of them live in rural / semi-urban / urban India pursuing agriculture / allied activities / small enterprise financed by own source of funds supplemented by small borrowings from BIFPL (not exceeding the threshold of Rs.60,000/- set by MFIN) and (v) their level of annual income / turnover is below the threshold limit of Rs.10 lakhs. They borrow from BIFPL within the undermentioned threshold limit either as part of the SHGs / JLGs or as individual members of the group.
15. Fixation of Threshold Limits- Fixing threshold limit based on transaction profile of customer is one of the essential features of Transaction Monitoring and facilitates monitoring of transactions / borrowings at the Branch level. The upper limit of lending to clients of NBFC-MFIs fixed by RBI is Rs 1 lakh but Micro Finance Institutions Network (MFIN) has set it still lower at Rs. 60,000/-. To reduce over-indebtedness, RBI / MFIN have stipulated that a borrower can borrow at a time from not more than two NBFC-MFIs. Hence, BIFPL will lend only to such borrowers who have outstanding borrowal facility from only one NBFC-MFI. This will be verified from internal Credit Bureau check conducted by BIFPL.
16. Periodical Updation of KYC Details: 'KYC updation'' can be defined as a process of customer identification and consequent re-affirmation of her identity using reliable, independent source documents, data or information available, in addition to the collection of a self-attested photograph. As per RBI Guidelines, NBFCs need to continue to carry out on-going due diligence with respect to the business relationship with every client and closely examine the transactions in order to ensure that they are consistent with their knowledge of the client, her business and risk profile and wherever necessary, the source of funds. As per RBI directions, the periodicity of KYC updation by BIFPL depends on the risk categorisation of the clients.
(a) Low Risk Clients: Full KYC exercise will be required to be done at least every ten years for low risk individuals and entities. While doing KYC exercise of low risk clients, BIFPL will not seek fresh proofs of identity and address, in case there is no change in status with respect to their identities and addresses but a self-certification by the client to that effect is to be obtained. In case there is a change in address, clients are to merely forward a self-certified copy of the document(s) through mail/post / agent / other member of the group etc. BIFPL branches need not insist on physical presence of such low risk customer at the time of periodical updation. (b) Medium Risk Clients: Full KYC exercise by BIFPL will be required to be done at least every eight years for medium risk individuals and entities. Full KYC exercise means obtaining latest KYC documents / Copies of other documents such as Aadhaar Card and Ration Card or Voter ID Card; copy of any document in respect of the nature of business and financial status of the client and details such as e-mail id / land line telephone number / mobile number etc and updating the same in the system. (c) High Risk Clients: Full KYC exercise will be required to be done by BIFPL at least every two years for high risk individuals and entities.
17. Monitoring of Transactions- Officials of BIFPL should exercise ongoing due diligence with respect to the business relationship with every client and closely examine the transactions in order to ensure that they are consistent with their knowledge of the client, her business and risk profile and where ever necessary, the source of funds. Monitoring clients’ activities and transactions that take place throughout a relationship helps BIFPL to know their customers, assess risk and provides greater assurance that BIFPL is not being used for the purposes of financial crime. Thus monitoring means analysis of a client’s transactions to detect whether the transactions appear to be suspicious from an AML perspective. BIFPL will close non- KYC complied accounts.
18. Record Management- BIFPL has to take, inter alia, the following steps regarding maintenance, preservation and reporting of customer account information, with reference to provisions of PML Act and Rules.
(a) Preserve the records pertaining to the identification of the customers and their addresses obtained while opening the account and during the course of business relationship, for at least five years after the business relationship is ended; (b) Evolve a system for proper maintenance and preservation of account information in a manner that allows data to be retrieved easily and quickly whenever required or when requested by the competent authorities; (c) Make available the identification records and transaction data to the competent authorities upon request; (d) Maintain records of the identity and address of their customer, and records in respect of transactions in hard or soft format and (e) Shall maintain confidentiality of information as provided in Section 45NB of RBI Act, 1934, as required of NBFCs.
A self-help group consists of 10-20 members from the same area/location having similar socio-economic background who come together to achieve a common goal - that of sustainable economic development which is achieved by sharing concerns, helping each other, resolving problems in a democratic manner and a participatory decision-making process.
A JLG is an informal group of 5 to 10 women formed based on trust and knowledge of each other’s business and character. They operate their business and live in the same locality. Each group selects a group leader who is responsible to coordinate repayments, liaising with the company, initiate and maintain group peer pressure. Each group member agrees to guarantee the loan of others in the group.
The JLG product offers help to our customers by financing their income generation activities and creation of assets, which have pronounced effect on the quality of their life.
Process by Branch Manager