KRA Agency: Transforming the Indian trading industry with effortless KYC

In the booming Indian broking industry, efficient stock market functioning depends on streamlined processes and robust regulatory measures to accommodate the increasing number of active investors. The Securities and Exchange Board of India (SEBI), as the country’s primary regulatory body, plays a crucial role in ensuring fair and transparent trading practices. As part of its efforts to strengthen market integrity and investor protection, SEBI introduced the concept of the Know Your Customer Registration Agency (KRA) agency. In this blog, we will explore the significance of the KRA agency in the demat industry and its impact on the Indian trading ecosystem. Source – SEBI {KYC (Know Your Client) Registration Agency (KRA)}, Regulations, 2011.

Understanding the Demat Industry and Role of SEBI

Before delving into the importance of the KRA agency, let’s first understand the demat industry. Dematerialization, commonly known as demat, is the process of converting physical share certificates into electronic form. It facilitates secure and convenient trading of securities such as shares, bonds, and debentures. The Demat account provides a centralized repository for holding and transacting securities electronically, eliminating the need for physical share certificates.

SEBI serves as the apex regulatory body for the securities market in India. Its primary objectives include protecting the interests of investors, promoting fair trading practices, and ensuring the development and regulation of the securities market. SEBI plays a pivotal role in maintaining market integrity and transparency, safeguarding the interests of investors, and promoting a level playing field for market participants.

Understanding the KYC Registration Agency (KRA) Agency

The Know Your Customer (KYC) process is an essential component of financial regulations worldwide, including in the securities market. It involves verifying the identity and credentials of clients to prevent money laundering, fraudulent activities, and other illicit practices. In India, SEBI recognized the need for a streamlined KYC process and established the KRA agency to act as a centralized repository of KYC records.

The KRA agency’s primary function is to gather, store, and maintain KYC information of investors in the demat industry. It acts as an intermediary between market intermediaries (such as brokers, depository participants, and mutual funds) and investors by facilitating the sharing of KYC data. The KRA agency helps eliminate duplication of KYC processes, ensures uniformity in compliance, and reduces the burden on investors and intermediaries.

When users complete the KYC process to open a demat and trading account with Paytm Money (or any broker), your account opening form, containing all your KYC details, will be sent to the KYC Registration Agency (KRA) for validation. Only after the KRA validates the KYC data, you will be granted trading rights.

According to SEBI, there are six registered agencies authorized as KRAs (KYC Registration Agencies) as of April 17, 2017 source: SEBI Registered intermediaries

1. Central Depository Services Limited (CDSL Ventures Limited)
2. National Securities Depository Limited (NSDL Database Management Limited)
3. National Stock Exchange of India Limited (DotEx International Limited)
4. Computer Age Management Services Pvt. Ltd. (CAMS KRA)
5. Karvy Fintech Private Limited (Karvy KRA)
6. Bombay Stock Exchange Technologies Pvt Ltd (BSE KRA)

Benefits of the KRA Agency

1. Streamlined KYC Process

The KRA stores and digitizes KYC (Know Your Customer) records in the securities market. When a client wants to open an account or trade with a SEBI-registered intermediary, they need to submit their KYC details using a KYC Registration form and supporting documents. The intermediary will perform the initial KYC process and upload the details to the KRA system. The important thing is that once the client’s KYC information is uploaded to the KRA system, it can be accessed by all SEBI-registered intermediaries. This means that if the client has already completed the KYC process with one intermediary, they don’t have to do it again with another intermediary. The KYC information is stored centrally and can be shared among different intermediaries, making it more convenient for clients and making the overall process more efficient and streamlined.

2. Market Integrity and Transparency

The KRA agency plays a vital role in maintaining market integrity by ensuring that only legitimate and verified investors participate in the demat industry. This helps prevent fraudulent activities and promotes transparency.

3. Regulatory Compliance 

SEBI can effectively monitor market intermediaries’ compliance with KYC regulations through the KRA agency. It allows for better oversight and enforcement of regulatory requirements. To open a demat account, intermediaries must submit the users’ KYC data to KRA. The KRA validates the KYC records, and once validated, trading rights are granted to investors for buying and selling securities.

SEBI’s focus on market integrity and transparency has been further strengthened with the introduction of the KRA agency, serving as the backbone of the Indian trading industry. As the trading landscape continues to evolve, it is imperative to have robust regulatory frameworks and efficient processes in place. The KRA agency’s role in the demat industry significantly contributes to the growth and development of India’s securities market, ensuring a fair and secure environment for investors and market participants alike.

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Happy Investing!