Verify Income Tax Returns Before Opening Accounts of Businessmen: RBI

The Reserve Bank of India (RBI) asked Urban Cooperative Banks (UCBs) to check income tax returns and other documents before opening accounts of businessmen as part of the KYC (Know Your Customer) norm. It directed all UCBs to verify the complete income tax details of the sole proprietor where the firm’s income is authenticated by the Income-Tax authorities.

In 2009, RBI had directed UCBs to put KYC norm for opening of accounts of proprietary or an entity concern. This guideline was in view to eradicate the fraudulent withdrawal of funds that was done by opening accounts in the name of the known business entity.

Now, RBI wants to expand the ambit of KYC norm to include IT returns along with the utility bills such as electricity, water, landline or telephone bills in the name of the proprietary concern. In 2009, RBI said that apart from monitoring transactions, all UCBs must be cautious while accepting high amount cheques and also large cash withdrawals of business entities.