Reserve Bank of India's Directives on KYC Updation
The Reserve Bank of India (RBI) has issued directives to regulated entities concerning the Know Your Customer (KYC) procedures, emphasizing a seamless experience for individual “low-risk” customers.
Key Directives
- Transactions for individual “low-risk” customers should continue, while ensuring their KYC details are updated by June 30, 2026, or within one year of falling due, whichever is later.
- This directive was prompted by significant delays in the periodic updation of KYC, affecting accounts opened for Direct Benefit Transfer (DBT) and Pradhan Mantri Jan Dhan Yojana (PMJDY).
Finance Minister's Guidance
- Finance Minister Nirmala Sitharaman has encouraged the financial sector to enhance KYC processes.
- She emphasized reducing unclaimed assets across various financial sectors and ensuring expedited refunds to rightful owners.
Business Correspondents Role
- Business Correspondents (BCs) are now allowed to assist with KYC updation.
- BCs can also aid in the activation of inoperative accounts.
- Self-declaration from customers can be obtained through BCs when there is no change in KYC information, or only an address change.
Periodic KYC Updation
- Regulated entities must notify customers in advance about the need for KYC updation.
- At least three advance intimations should be sent, with one being a letter.
- Post the due date, at least three reminders should be sent to non-compliant customers, including one letter.
- Entities are expected to implement these guidelines by January 1, 2026.
Additional Measures
- Banks should organize camps and campaigns, especially in rural and semi-urban areas, to focus on KYC updates.
- Facilities for activating inoperative accounts and updating KYC should be available at all branches, including non-home branches.
- Video-Customer Identification Process (V-CIP) can be used for KYC updates.
The RBI’s initiative aims at tighter KYC norms to facilitate benefits from DBTs, reduce inoperative accounts, and prevent frauds.