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    Question

    What is the purpose of performing Due Diligence by banks

    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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