Addressing Sebi's 38th Foundation Day last month, Nirmala Sitharaman railed against the myriad KYC norms spooking retail investors. 'It is the shared responsibility of all stakeholders to ensure that no citizen has the need to repeat the same KYC verification journey across multiple financial products and platforms. We must all work collectively towards it with a sense of urgency,' she said.
The FM's remarks were spot on. However, solving dysfunctional KYC is only tackling the symptom, akin to treating fever instead of the underlying malaise. It reflects the sad truth about India being a low-trust economy and, consequently, one with high friction. Contrast this with Singapore or Dubai, both of which showcase zero friction as their calling card. While fixing KYC may alleviate some of the problems, the real solution lies in breaking the circle of mistrust.
