The Central KYC Records Registry, which stores the KYC records of customers of financial institutions, is operated by which body?

The correct answer is B, current account. A current account is meant for traders, firms and companies that need to receive and pay money many times a day. Because the bank must keep the whole amount ready at all times, it pays no interest on the balance; in return the customer gets an unlimited number of transactions, cheque facility and, where the bank agrees, an overdraft that allows withdrawal beyond the credit balance.

Option A, the savings account, is an interest bearing account meant to encourage thrift by individuals, so it is not the answer. Option C, a recurring deposit, needs a fixed instalment every month and pays interest like a term deposit. Option D, a fixed deposit, keeps a lump sum for a set period at the highest rate the bank offers and cannot be operated like a running account. Only the current account combines no interest with an overdraft.

The correct answer is B, Prevention of Money Laundering Act, 2002. Know Your Customer rules exist to stop the banking system being used to launder the proceeds of crime or to finance terrorism. The Act of 2002 and the Prevention of Money Laundering (Maintenance of Records) Rules of 2005 made under it require every banking company to verify the identity of its clients and keep records, and the Reserve Bank has collected these obligations in its Master Direction on KYC.

Option A, the Banking Regulation Act of 1949, governs licensing, management and supervision of banks but is not the source of KYC. Option C, the Negotiable Instruments Act of 1881, deals with cheques, bills of exchange and promissory notes. Option D, FEMA of 1999, governs foreign exchange transactions and non-resident accounts. Each is a real banking law, which is what makes this question worth attention.

The correct answer is B, PAN card. The list of officially valid documents in the KYC rules is closed and contains the passport, the driving licence, proof of possession of an Aadhaar number, the voter identity card issued by the Election Commission, a job card issued under MGNREGA and signed by an officer of the state government, and a letter issued by the National Population Register. The PAN card is not in this list because it proves neither address nor, by itself, the standard of identity the rules require.

Options A, C and D are all in the list and are the documents customers most often produce. Note the separate rule that a bank must obtain the permanent account number or a declaration in Form 60 for income tax purposes, which is why many candidates wrongly treat the PAN card as a KYC document. Examiners exploit exactly this confusion, sometimes also placing the ration card among the options.

The correct answer is B, it requires no minimum balance to be kept. The Basic Savings Bank Deposit Account replaced the earlier no-frills account as the vehicle of financial inclusion. It can be opened by any person who satisfies the KYC rules, needs no minimum balance, and comes with a free ATM or debit card and a fixed number of free withdrawals every month, and the bank cannot charge a penalty for a low balance. A holder of such an account may not keep another savings account in the same bank.

Option A is wrong because the interest rate is the same as on an ordinary savings account in that bank. Option C is wrong because there is no age restriction; the account is open to all, and the Jan Dhan accounts are of this type. Option D is wrong because no overdraft comes automatically, though a small overdraft is allowed to eligible Jan Dhan account holders after satisfactory operation.

The correct answer is A, once in two years. Banks classify customers as low, medium or high risk when the account is opened, on the basis of identity, social and financial standing and the nature of the expected business. Periodic updation of records is then tied to that classification: once in two years for high risk customers, once in eight years for medium risk and once in ten years for low risk. Updation does not mean opening a new account; the customer confirms or corrects the existing details.

Option B, five years, is not a period used in the Direction at all. Option C, eight years, is the interval for medium risk customers, and option D, ten years, is the interval for low risk customers, so both are real numbers placed against the wrong category, which is the standard way this question is set. Remember the sequence two, eight and ten in rising order of safety.