The Reserve Bank of India (RBI) has issued draft proposals for changes in the process of periodic updation of the Know-Your-Customer (KYC) in bank accounts. The proposed rules are expected to make bank customers’ lives easier due to the requirement of periodic KYC updation.
As per the RBI, “The Reserve Bank has observed a large pendency in periodic updation of KYC, including in the accounts opened for credit of Direct Benefit Transfer (DBT)/ Electronic Benefit Transfer (EBT) under Government schemes to facilitate credit of DBTs and/ or scholarship amount (DBT/ EBT/ scholarship beneficiaries) and accounts opened under PMJDY. Reserve Bank has also been receiving complaints regarding challenges faced by the customers in periodic updation of their KYC.”
The comments on the draft Amendment Directions are invited from the public/ stakeholders till June 6, 2025.
Time till June 30, 2026, to do KYC for these bank customers whose periodic KYC update is due
As indicated by the draft, bank customers will be in various risk categories. All bank customers are required to update their KYC periodically as communicated by their respective banks. As per the new rules, if a bank customer is categorised as low-risk, then he shall be allowed transactions for one year or till June 30, 2026, whichever is later.As per the draft, “Notwithstanding the provisions given above, in respect of an individual customer who is categorised as low risk, RE shall allow all transactions and ensure the updation of KYC within one year of its falling due for KYC or upto June 30, 2026, whichever is later. The RE shall subject accounts of such customers to regular monitoring. This shall also be applicable to low-risk individual customers for whom periodic updation of KYC has already fallen due.”
Provide due notices for KYC updation to the customers
The RBI, in its draft proposal, has asked the banks to provide adequate notices to the customers when the KYC in their bank accounts become due. The banks are required to give at least three advance intimation regarding periodic KYC updation.
As per the draft proposal, “RE shall intimate its customers, in advance, to update their KYC. Prior to due date of periodic updation of KYC, RE shall give at least three advance intimations, including at least one intimation by letter, at appropriate intervals to its customers through available communication options/ channels for complying with the requirement of periodic updation of KYC.”
In case the customer is unable to do the periodic KYC updation within the due period, banks are required to give three reminders about the KYC as well.
“Subsequent to the due date, RE shall give at least three reminders, including at least one reminder by letter, at appropriate intervals, to such customers who have still not complied with the requirements, despite advance intimations. The letter of intimation/ reminder may, inter alia, contain easy to understand instructions for updating KYC, escalation mechanism for seeking help, if required, and the consequences, if any, of failure to update their KYC in time. Issue of such advance intimation/ reminder shall be duly recorded in the RE’s system,” as per the draft proposals.
Use Business Correspondent to do KYC in certain cases
Another rule proposed by the RBI in its draft is the use of Business Correspondent (BC) by banks for the updation/periodic updation of KYC. This proposal will help the bank customers to visit their nearest BC to do the KYC as mandated under the KYC rules. However, customers can do their KYC via BC only if there is limited updation.
As per the draft proposal, “Self-declaration from the customer in case of no change in KYC information or change only in the address details may be obtained through an authorised BC of the bank. In such case, after successful biometric-based e-KYC authentication, the bank shall obtain the self-declaration, including the supporting documents, if required, from the customer through the BC. A bank may enable its BC systems for recording these self-declarations and supporting documents thereof in electronic form in the bank’s systems. In case such an option is not available in the electronic mode and such a declaration is submitted in physical form by the customer, the BC shall authenticate the self-declaration and supporting documents submitted in person by the customer, and promptly forward the same to the concerned bank branch. The BC shall provide the customer an acknowledgement of receipt of such declaration /submission of documents. The bank branch shall update the customer’s KYC records and intimate the customer once the records get updated in the system, as required under paragraph 38(c) of the Master Direction ibid. It is reiterated that the ultimate responsibility for periodic updation of KYC remains with the bank.”
Simplification of periodic KYC updation
The RBI, in the draft, is proposing the simplification of updation and periodic KYC. This includes:
i) Self-declarations – REs are allowed to obtain self-declaration regarding “no change in KYC information” or “a change only in address details” from customers using digital and non-digital modes, through customer’s email / mobile number registered with the RE, ATMs, digital channels (such as online banking / internet banking, mobile application of RE), letter, BCs, etc.
(ii) The updation/ periodic updation of KYC records are allowed to be carried out at any branch of the RE with which customer maintains the account.
(iii) Aadhaar OTP based e-KYC and V-CIP are permitted for the purpose of updation/ periodic updation of KYC. (iv) REs have been directed to update customers’ KYC information/ records based on the update notification received from CKYCR.
Ease of KYC for first time customers
Apart from making the process of KYC updation easier, the RBI is also trying to ease the KYC process for first-time customers. The central bank has provided three ways for banks to do the KYC of first-time customers.
a) Face to Face mode: As per the draft proposal, the customer’s KYC can be done via Aadhaar biometric based e-KYC. “Customer may be onboarded in face-to-face mode through Aadhaar biometric based e-KYC authenticating and, in such case, if customer wants to provide a current address, different from the address as per the identity information available in the UIDAI database (i.e., Central Identities Data Repository), he may give a self-declaration to that effect to the RE (ref. paragraph 16 of the Master Direction on KYC). Further, the Digital KYC process is also allowed for customer onboarding,” said the draft proposal.
b) Non-face-to-face (NFTF) mode for KYC: A bank can use either of the two ways to do KYC of a customer in NFTC mode. The first method is consent-based. As per the draft proposal, “Consent-based onboarding of customer in NFTF mode may be done using Aadhaar OTP based e-KYC authentication which is subject to certain conditions (ref. paragraph 17 of the Master Direction on KYC). Further, such account shall be placed under strict monitoring, and Customer Due Diligence (CDD) procedure shall be completed within a year. “
The second method is the use of digital modes for KYC. “Customer onboarding in NFTF mode using digital modes such as KYC Identifier, equivalent e-documents, documents issued through DigiLocker, and non-digital modes such as obtaining copy of OVD certified by additional certifying authorities as allowed for NRIs and PIOs are subject to certain conditions,” as per the draft rules.
C) KYC via video-based process: The third process is the video-based customer identification process (V-CIP). As per the RBI draft, the video based process is treated on par with face-to-face onboarding. “V-CIP is an alternate method of Customer Due Diligence by an authorised official of the RE by undertaking seamless, secure, live, informed and consent-based audiovisual interaction with the customer to obtain identification information required for customer due diligence purpose.”
