KATHMANDU: The centralized know your customer (KYC) system for exchanging depositor information among banks and financial institutions will be implemented next year. Although the central bank announced the creation and implementation of this system in the monetary policy of the current fiscal year (FY), only a study has been completed so far.

"The study to establish a centralized KYC system has been completed," said Dilliram Pokharel, Deputy Spokesperson for Nepal Rashtra Bank. "After taking the suggestions of the stakeholders, we will finalize and implement it."

The central bank has not yet published the study report on the new KYC system. The central bank is currently discussing the study report provided by an independent consultant. The report suggests that customer information could be exchanged through the credit information center or by forming a separate body.

Currently, there are 55 million accounts held by ordinary people in banks and financial institutions. As many people open accounts in multiple banks, the number of accounts exceeds the population. Presently, account holders must fill out the KYC form for each bank where they hold an account. To address this issue, the central bank plans to establish a centralized customer identification system that all financial institutions can use.

The current year's monetary policy mentions creating and implementing a centralized customer identification system to facilitate the exchange of customer information between banks, financial institutions, and other licensed payment-related organizations. The system will also link to the national identity cards issued by the government. The government has recently published a notice in the Nepal Gazette, making the national identity card compulsory for accessing public services from next January. Once the centralized customer identification system is established, the system operator will update public information.

After joining the system, customers will receive a unique identification number. Banks can use this number to update customer information. Therefore, after the system's implementation, customers will only need to update their information in one place.

India has implemented a Central Customer Identification System since 2016. The system, established with investment from the Government of India, distributes customer identities to financial institutions.

In Nepal, the centralized electronic customer identification system (KYC) has been used in the securities market since last July. After updating their details in the KYC system operated by CDS and Clearing Limited, customers do not need to update their KYC separately at securities dealers and merchant banks. Affiliated companies update the KYC using the number provided by CDS and Clearing. However, the number of C-KYC users in the securities market remains low.

According to the Anti-Money Laundering Act, financial institutions must keep their customers’ details up-to-date. Many people find it increasingly difficult to comply with the requirement to update their details with the institutions where they do business.