RBI Eases KYC Norms to Simplify Periodic Updation and Enhance Customer Convenience

Introduction
The Reserve Bank of India (RBI) has introduced significant amendments to its Know Your Customer (KYC) framework to facilitate easier onboarding and periodic updation of KYC details by customers. These changes, incorporated in the Master Direction – Know Your Customer (KYC) Direction, 2016 (updated from time to time), are aimed at streamlining procedures and reducing compliance burdens while maintaining robust customer due diligence practices.

Key Revisions to KYC Processes

1. Central KYC Registry (CKYCR) as a Primary Reference
   Regulated Entities (REs), including banks, are directed to use the KYC Identifier assigned by the CKYCR as the primary reference for establishing account-based relationships or verifying customer identity. At the time of onboarding, REs shall retrieve KYC records from CKYCR with the customer’s consent. Customers are not required to resubmit records unless there is a change in the data held by CKYCR.
2. Simplified KYC Updation for Customer Convenience
   In light of the growing pendency of periodic KYC updates—particularly in accounts opened under Direct Benefit Transfer (DBT), Electronic Benefit Transfer (EBT), and the Pradhan Mantri Jan Dhan Yojana (PMJDY)—the RBI has revised its guidelines to make periodic KYC updates more accessible. Notable changes include:
   • Authorizing Business Correspondents (BCs) to assist customers with KYC updates.
   • Allowing transactions for low-risk customers even if KYC updates are pending, subject to prescribed conditions.

Customer Onboarding Methods

1. Face-to-Face Mode
   Customers may be onboarded through Aadhaar-based biometric e-KYC authentication. If a customer wishes to provide a current address differing from the UIDAI database, they may submit a self-declaration to that effect. Digital KYC is also permitted under this mode.
2. Non-Face-to-Face (NFTF) Mode
   Customers may be onboarded remotely using:
   • Aadhaar OTP-based e-KYC (subject to conditions). Such accounts must be closely monitored, and full Customer Due Diligence (CDD) must be completed within one year.
   • Digital methods like KYC Identifier, equivalent e-documents, DigiLocker-issued documents.
   • Non-digital methods such as certified copies of Officially Valid Documents (OVDs), particularly for Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs), under specific conditions.
3. Video-based Customer Identification Process (V-CIP)
   V-CIP is an alternative to face-to-face onboarding, wherein an authorised RE official conducts a secure, live, and consent-based video interaction with the customer to complete CDD. V-CIP is treated as equivalent to physical verification.

KYC Updation and Periodic Updation

• Self-Declaration Based Updation
  Customers may update their KYC through a self-declaration of “no change” or “change in address only” via digital or non-digital channels. These include:
  • Registered email/mobile number
  • Internet/mobile banking
  • ATMs
  • Business Correspondents
  • Written letters
• Modes of KYC Updation
  • Aadhaar OTP-based e-KYC
  • V-CIP
  • Physical verification at any branch of the RE where the customer holds an account
• CKYCR-based Updates
  REs are mandated to update customer KYC records based on update notifications received from the Central KYC Registry.

Additional Directions for Regulated Entities

• Low-Risk Customer Transactions
  Transactions may continue for low-risk customers even if KYC updation is pending, provided it is completed within one year of the due date or by June 30, 2026, whichever is later.
• Mandatory Intimations and Reminders
  • Banks must issue at least three advance notices (including one by letter) before the KYC due date.
  • In case of non-compliance, three follow-up reminders (including one by letter) must be sent.
• Reactivation of Accounts
  REs are encouraged to adopt an empathetic approach and facilitate reactivation of accounts frozen due to non-updation of KYC.
• Internal KYC Policy Provisions
  REs may retain internal policies requiring:
  • Physical presence of customers
  • More frequent KYC updates
  • Updates to be carried out at the customer’s home branch
• Public Outreach and KYC Camps
  Banks are advised to conduct awareness campaigns and organize KYC updation camps, especially in rural and semi-urban areas, to enhance compliance and inclusion.

Conclusion
These revisions mark a customer-centric shift in the RBI’s regulatory approach, aimed at enhancing accessibility and reducing friction in banking services while safeguarding the integrity of the financial system through continued due diligence.