C&M E-Alert: RBI PROPOSES TO SIMPLIFY KYC RELATED COMPLIANCES
- Bhargesh Ojha
- Jun 3
- 3 min read
The Reserve Bank of India (“RBI”) has on 23rd May 2025 issued two press releases in context of the following draft circulars:
A draft circular on ‘Updation/ Periodic Updation of KYC - Revised Instructions’ has been released, which includes the draft RBI (Know Your Customer) (“KYC”) (Amendment) Directions, 2025 (“Draft Amendment”). This draft modifies the RBI KYC Direction, 2016 (as amended from time to time) (“Master Direction”).
A draft circular titled ‘Inoperative Accounts/ Unclaimed Deposits in Banks – Revised Instructions (Amendment) 2025’ (“Draft Circular”) has been released. This draft modifies the Inoperative Accounts/ Unclaimed Deposits in Banks - Revised Instructions, dated January 1, 2024.
The proposed changes aim to ease the burden on the banks and other Regulated entities (“RE”) customers, especially in the context of KYC compliance requirements.
The RBI has invited comments on the Draft Amendment and Draft Circular from the public and stakeholders until June 6, 2025.
BACKGROUND AND OBJECTIVE |
The RBI has noted a significant backlog in periodic KYC updation, especially in accounts created for Direct Benefit Transfer (DBT), Electronic Benefit Transfer (EBT), and the Pradhan Mantri Jan Dhan Yojana (PMJDY). Additionally, several customer complaints have been received regarding challenges in complying with KYC updation requirements.
The RBI, with the objective to ease the process and enhance customer convenience, is also amending the instructions regarding updation/ periodic updation of KYC to allow Business Correspondents (“BC”) to facilitate the process of KYC and KYC updation vide the Draft Amendment. Further, pursuant to the Draft Circular, the KYC for operative accounts/ unclaimed deposits accounts be done with the help of services of an authorised BCs of the bank be utilized for activation of inoperative accounts.
The key changes proposed in Draft Amendment and Draft Circular are given below:
A. Relaxation for ‘low risk’ individual customers |
The RBI intends to provide extended timelines to low-risk customers, allowing continued transactions and ensure the updation of KYC within one year of its falling due for KYC or up to June 30, 2026, whichever is later. However, REs are required to regularly monitor the accounts of such customers.
B. Use of business correspondent by banks for updation/ periodic updation of KYC in limited cases |
The Draft Amendment envisage that BCs services can be used by the bank for the updation/ periodic updation of KYC. The RBI allows self-declarations from customers (in case of no change in KYC details or change in address only) to be collected through an authorised BC and BC may also collect these declarations after successful biometric-based e-KYC. If the customer provides any supporting documents (such as proof of address in case of address change), these are to be collected by the BC. These documents should be submitted and forwarded promptly to the concerned bank branch for processing and record-keeping.
C. Advance notices and intimation for periodic updation of KYC cases |
The Draft Amendment mandates that REs provide notices and intimations to be sent to the relevant customer at period intervals for updation/ periodic updation of KYC.
Prior to due date of updation/ periodic updation of KYC:
RE is required to send reminders to its customers with at least three advance notices (and one such notice has to be by a letter).
Such reminders should be sent at appropriate intervals.
Post to due date of updation/ periodic updation of KYC (If the customer is still non-compliant):
Subsequent to the due date, RE is required to send reminders to its customers, including at least three notices (with at least one such notice sent by letter).
Such reminders should be sent at appropriate intervals.
RE should also include the following as part of the intimation/reminder:
Easy-to-understand instructions for updating KYC.
Escalation mechanism for seeking help, if required.
The consequences, if any, of failure to update KYC in time.
D. The RBI pursuant to the Draft Circular proposed that the bank’s authorized BCs to be utilized for activating inoperative accounts, as prescribed above in (B). cases |
Comentarios