Business Flow of new account openers slow despite simplified KYC

The flow of new account openers at banks is still slow even though Nepal Rastra Bank (NRB) has relaxed the know your customer (KYC) requirements. Extra paperwork imposed by the central bank had put off potential customers spreading concern among bankers.
Banks and financial institutions (BFIs) said that their existing depositors too had not provided additional documents as required by the central bank’s directive. NRB has extended the deadline for them to update their information till the end of this fiscal year.
The central bank issued stringent KYC requirements on October 12, 2012 as per the country’s international commitment against anti-money laundering and terrorist financing.
Under the new rules, potential account openers had to provide photocopies of the citizenship certificates of their antecedents going back three generations.
BFIs had asked the central bank to simplify the requirements after the number of new account openers dropped drastically because of the complicated paperwork.
Last February, NRB changed the provision stating that it would be enough to provide only the number of the citizenship certificates. The central bank has told the BFIs that they have to pay a fine of Rs 500,000 as per the Anti-Money Laundering Act if they do not seek the details as per the directive.
However, bankers said that it had not made any significant difference to the downward trend.
“There has not been any significant difference after NRB simplified the provision,” said Sashin Joshi, chief executive officer of NIC Bank. He added that the new KYC rules had resulted in the number of new account openers dropping by half at his bank. “We used to see 1,000-1,500 new account openings daily which has now fallen by half,” he said. NIC Bank presently has around 170,000 deposit accounts.
Similarly, Nepal Investment Bank Limited (NIBL) said that new account openers stayed away in droves in the second quarter of this fiscal after the new KYC rules were issued.
“The number of new accounts decreased by 30-35 percent in the second quarter,” said CEO Jyoti Pandey. He added that things had improved after the central bank simplified the
procedures. “First, we have to develop the habit of submitting family
background details to open an account,” he said. The bank has 482,000 plus deposit accounts.