Introduction
The verification of identity lies at the core of India’s BFSI sector. With a population of over 1.4 billion, the need for a reliable system to establish “who is who” is both practical and regulatory. Every banking transaction, insurance policy, mutual fund investment, or welfare disbursement depends upon the assurance that the individual or entity involved is genuine.
The Prevention of Money Laundering Act, 2002 (PMLA) and its associated Prevention of Money Laundering (Maintenance of Records) Rules, 2005 form the legal backbone to maintain this assurance. Rule 2(d) introduces the concept of Officially Valid Documents (OVDs) within these rules. These documents serve as the standard benchmarks of identity and address verification across sectors.
The Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), the Insurance Regulatory and Development Authority of India (IRDAI), and the Financial Intelligence Unit (FIU-IND) all draw upon this foundation when issuing sector-specific KYC and AML guidelines.
OVDs are essential in enhancing customer trust, enabling faster service delivery, and ensuring that the benefits of financial inclusion and welfare schemes reach the intended recipients. In practice, OVDs are the gateway to accessing services like opening a savings account, applying for an education loan, purchasing an insurance policy, or registering for government benefits.
What Is An OVD?
An OVD or “Officially Valid Document”, defined in Rule 2(d) of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005, means the Passport, the Driving Licence, proof of possession of Aadhaar number, the Voter’s Identity Card issued by the Election Commission of India, the job card issued by NREGA duly signed by an officer of the State Government, the letter issued by the Unique Identification Authority of India or the National Population Register containing details of name, address and Aadhaar number, or any other document as notified by the Central Government in consultation with the Regulator.
Deemed OVDs For Identity
Where simplified measures are applied to verify identity, the following are also deemed OVDs:
- Identity card with applicant’s photograph issued by Central/State Government Departments, statutory/regulatory authorities, PSUs, scheduled commercial banks, and public financial institutions.
- A letter issued by a gazetted officer, with a duly attested photograph of the person.
Deemed OVDs For Address (Limited Scope)
Where simplified measures are applied for the limited purpose of proof of address and a prospective customer is unable to produce any evidence of address, the following are deemed OVDs:
- Utility bills (electricity, telephone, post-paid mobile, piped gas, water) are not over two months old.
- Property or municipal tax receipt.
- Bank account or Post Office savings bank account statement (or, if the reporting entity is in an IFSC, a foreign bank statement).
- Pension or family pension payment orders (PPOs) issued to retired employees by Government Departments or PSUs, if they contain the address.
- Letter of allotment of accommodation from employers in the public sector (and similar bodies) or leave-and-licence agreements with such employers.
These address relaxations are for a limited purpose and do not replace the obligation to maintain current KYC.
Foreign Nationals And IFSC Provisions
- If the OVD presented by a foreign national does not contain an address, documents issued by the Government departments of those foreign jurisdictions and letters from a Foreign Embassy or Mission in India are acceptable as proof of address.
- In an International Financial Services Centre (IFSC), the national identity card and voter identification card issued by foreign jurisdictions (or their authorised agencies), capturing the photograph, name, date of birth and address of a foreign national, are also considered OVDs.
Aadhaar — Permitted Forms
A client may submit proof of possession of an Aadhaar number as an OVD using the form issued by UIDAI (physical or approved electronic forms).
Name Change — Continued Validity Of OVD
An OVD remains valid even if the name has changed after issuance, provided the change is supported by a marriage certificate issued by the State Government or a Gazette notification indicating the change of name.
Other Related Definitions For OVD Use
- Offline verification has the same meaning as in the Aadhaar Act; it enables identity verification without online authentication, consistent with the Act’s definition and modalities permitted thereunder.
- Politically Exposed Persons (PEPs) are individuals entrusted with prominent public functions by a foreign country (e.g., heads of state/government, senior politicians, senior government/judicial/military officers, senior executives of state-owned corporations, and key political party officials). The PEP classification affects customer risk categorisation and is used alongside OVD-based identification during onboarding and ongoing due diligence.
It is important to note that OVDs serve identity and address; separate documents are not required if the OVD’s address is current. For non-individual clients (companies, partnerships, trusts), entity documents are required in addition to OVDs of natural persons who are beneficial owners, authorised signatories or controllers.
Importance Of OVDs In KYC And AML Compliance
In India, every reporting entity must carry out Know Your Customer (KYC) checks under the Prevention of Money Laundering Act (PMLA) and its Rules. By insisting on a standard set of recognised documents, like OVDs, regulators prevent institutions from adopting inconsistent or weak identification practices.
Strengthening Anti-Money Laundering Controls
OVDs are key to the Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT) frameworks. By verifying each account, investment, or policy against a government-recognised document, OVDs:
- Deter the creation of anonymous or fictitious accounts.
- Enable audit trails, linking financial flows back to verified individuals.
- Support filing suspicious transaction reports (STRs) to the Financial Intelligence Unit (FIU-IND) with reliable identity details.
Regulatory Mandates Across Financial Sectors
The reliance on OVDs is reinforced across multiple regulators:
- Reserve Bank of India (RBI): OVDs form the core of customer onboarding in banks, NBFCs, payment service providers, and digital lending platforms.
- Securities and Exchange Board of India (SEBI): Investor onboarding through KYC Registration Agencies (KRAs) must be based on OVDs to ensure consistency across capital markets.
- Insurance Regulatory and Development Authority of India (IRDAI): Life and general insurers must obtain OVDs when issuing policies or processing high-value claims.
- Financial Intelligence Unit (FIU-IND): Relies on OVD-linked records to assess compliance and detect suspicious financial behaviour.
Use Cases Of OVDs In The Banking and Financial Services (BFSI) Sector
OVD Requirement For Opening Bank Accounts
Banks are legally required to obtain OVDs from individuals for both Current and Savings accounts (CASA). A valid OVD establishes identity and address and ensures compliance with RBI’s KYC Master Direction. This means furnishing documents such as a passport, Aadhaar, or voter card for retail customers. Without an OVD, banks cannot activate an account, even if deposits have been made. In addition, when addresses in OVDs are outdated, customers must provide deemed OVDs (such as utility bills) until an updated OVD is produced.
OVDs For Loans, Credit Cards, And Deposits
Banks and NBFCs depend on OVDs to process loans, issue credit cards, or open fixed deposits. The documents allow lenders to establish the borrower’s identity, residence, and credit eligibility. In secured lending, OVDs of co-applicants and guarantors are also mandatory. For high-value credit exposure, updated OVDs reduce the risk of fraud, misrepresentation, and defaults.
OVD Documents For Corporate And Institutional Customers
Companies and partnerships must provide their incorporation or registration documents when opening current accounts or availing trade finance. However, the authorised signatories, directors, partners, and beneficial owners must submit their personal OVDs. This ensures that the individuals who control or transact on behalf of the entity are also traceable. For foreign companies, passports and identity cards issued by foreign governments (recognised under the Rules) may serve this purpose.
OVD Role In NBFCs And Fintech Onboarding
Digital lenders, microfinance institutions, and fintech companies increasingly rely on paperless KYC. Even in electronic KYC (e-KYC) journeys, OVDs are essential — typically Aadhaar (with consent-based authentication), driving licence, or voter ID. For prepaid payment instruments (PPIs), wallets, or UPI onboarding, OVDs establish the customer’s true identity, enabling RBI-mandated full-KYC accounts. This ensures small-ticket digital transactions remain secure and AML-compliant.
OVDs In Insurance Policies And Claims
Under IRDAI rules, insurers must collect OVDs before issuing life or general insurance policies. These documents confirm the proposer’s identity and address, reducing the risk of mis-selling or fraudulent claims. The insured and the beneficiary’s OVDs are critical for nominee verification or claims settlement. This ensures benefits are disbursed to the rightful claimant, protecting policyholders and strengthening insurer compliance.
OVD Requirement For Mutual Fund And Capital Market Investors
The Securities and Exchange Board of India (SEBI) has mandated that all investor KYC records maintained by KRAs (KYC Registration Agencies) must be validated against OVDs. Investors cannot open a demat account, trade in securities, or start a mutual fund folio without furnishing OVDs. Foreign identity cards and embassy-issued letters may be accepted for non-resident investors per PML Rules. This standardisation ensures consistency and investor protection across the capital markets.
