what I meant by kyc documents being public document is in the sense that, most of the documents we present for verifications are all documents that we have are requested and used by their party, e.g your driver license which is use for kyc verification os a public document because the road safety can ask for it from you or even the police, including the banks,.
Yes, but not random people on the street. There is also a big difference between showing your drivers license to a single officer who pulls you over, and scanning it in to electronic send it with unknown security to an unknown third party for unknown storage and unknown distribution.
As you say, banks request to see these documents for proof of ID and to open accounts, loans, credit cards, etc. Given that, then you can clearly see why letting random strangers have access to these documents poses a massive financial risk.