What is the purpose of performing Due Diligence by banks

Q: Answer-What is the purpose of performing Due Diligence by banks under KYC norms?

Due diligence helps banks understand a customers financial profile and intentions, allowing them to identify credit risks and prevent fraud. Its a core step in a risk-based KYC process, especially for MSME borrowers where documentation may vary.

under KYC norms?

A To detect forgery Correct Answer Incorrect Answer

B To assess credit risk Correct Answer Incorrect Answer

C To avoid customer complaints Correct Answer Incorrect Answer

D To calculate taxes Correct Answer Incorrect Answer

E To reduce operational costs Correct Answer Incorrect Answer

Solution

Due diligence helps banks understand a customer's financial profile and intentions, allowing them to identify credit risks and prevent fraud. It’s a core step in a risk-based KYC process, especially for MSME borrowers where documentation may vary.

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