Officially valid documents

Aadhaar is the obvious document, and for most clients it is the one used. But section 11A of the Prevention of Money Laundering Act, inserted with effect from 2019, made a point of saying that Aadhaar is not mandatory. It is voluntary evidence, produced at the client's own desire.

So the law names alternatives, and those are the Officially Valid Documents. They are also voluntary — the client chooses which to give.

The practical importance is obvious in a commodity market. The people the derivatives market is supposed to serve include farmers and members of Farmer Producer Organisations, and an identity regime that accepted only one document would exclude a good number of them. The NREGA job card in the list is not decoration.

The four alternatives the workbook names are the driving licence, a passport copy, the voters' ID and the job card issued by NREGA.

KYC itself has three basic attributes: the client's identity proof, the client's address proof, and Independent Personal Verification — personal verification of the client, which the workbook treats as the stronger proof that the entity actually knows its customer, documented through a client visit report.

The document set that must be executed before a new client trades is: the KYC form, the Member-Client constituent agreement, and the Risk Disclosure Document. Separately, PAN or e-PAN is mandatory for the Unique Client Code, verified against the original or against the Income Tax Department website in the case of e-PAN.

The surrounding infrastructure, in the order the workbook introduces it:

• KYC Registration Agencies were provided for in November 2019 and recognised on 22 April 2020 — CDSL Ventures Limited, NSDL Data Management Limited, DotEx International Limited and CAMS Investor Services Private Limited.
• A client may start trading as soon as registration is complete, but the member must upload KYC details to the KRA within 10 days of receiving the documents.
• For Aadhaar e-authentication, members register as sub-KUA of a SEBI-permitted KYC User Agency, under the circular of 8 February 2023.
• April 2020 guidelines encourage video-based client identification, online apps, digital locker, digital signature and e-signature, in line with RBI's guidelines for banks and NBFCs.
• Following the Supreme Court judgment of 30 April 2025, digital KYC must be accessible to persons with disabilities: an account may be opened with a guardian's signature, eKYC must be available, and a blind person who cannot perform the blink-based liveness test must not be denied eKYC — alternates include facial expressions, nodding, showing an OTP on screen, real-time video recording and displaying documents on screen.

A guar seed farmer in Rajasthan wants to hedge his own crop and has no Aadhaar.

He opens an account with his NREGA job card as identity evidence and his voter ID for address, signs the Member-Client agreement and the Risk Disclosure Document, and supplies his PAN for the Unique Client Code. His broker does an in-person verification at his village and files the client visit report. The KYC is uploaded to a KRA within ten days.

He then sells 2 lots of guar seed futures at Rs 4,050 per quintal, lot 1 MT = 10 quintals:

Contract value = 2 x 10 quintals x Rs 4,050 = Rs 81,000
Initial margin plus ELM at, say, 6%          = Rs  4,860

At harvest, spot falls to Rs 3,950. He sells his 2 MT in the mandi for Rs 79,000, losing Rs 2,000 against his plan, and buys back the futures at Rs 4,000, gaining 2 x 10 x 50 = Rs 1,000 — a partial offset, and a textbook short hedge.

None of that happens if the account could not be opened. Rs 4,860 of margin and a job card is the entire barrier between a smallholder and a hedged harvest, which is the policy reason the OVD list is drawn as widely as it is.

Chapter 10 (Code of Conduct and Investor Protection Measures), section 10.2, and the KYC attributes in section 10.2.3. Expect the list itself to be tested, the point that Aadhaar is voluntary, the 10 day KRA upload window, and IPV as one of the three basic KYC attributes.

• Aadhaar is voluntary, not mandatory. PAN or e-PAN, by contrast, is mandatory for the Unique Client Code.
• The NREGA job card is an OVD. Candidates drop it because it does not look like an identity document.
• Ten days is the KRA upload window, counted from receipt of documents — not from the first trade. The client may trade before the upload.
• IPV is a separate attribute from identity and address proof, evidenced by a client visit report.
• KRAs are not depositories. CDSL Ventures and NSDL Data Management are KRAs; CDSL and NSDL themselves are depositories, and CCRL and NeRL are commodity repositories. Four different animals with overlapping names.
• The blink liveness test cannot be the only route to eKYC. Alternates must be offered to a client who cannot perform it.