The Reserve Bank of India (“RBI”), in exercise of the powers conferred by Section 35A read with Section 56 of the Banking Regulation Act, 1949, Section 45JA, Section 45K and Section 45L of the Reserve Bank of India Act,1934, Section 10(2) read with Section 18 of Payment and Settlement Systems Act, 2007, Section 11(1) of the Foreign Exchange Management Act, 1999, Rule 9(14) of Prevention of Money-Laundering (Maintenance of Records) Rules, 2005, vide Circular No. DOR.AML.REC.30/14.01.001/2025-26,[1] dated June 12, 2025, has issued the Reserve Bank of India (Know Your Customer (KYC)) (Amendment) Directions, 2025 (“Amended KYC Regulations”).
The Amended KYC Regulations introduced significant changes to the Know Your Customer (“KYC”) compliance framework under the existing 2016 Master Direction. These changes, now in force, aim to strengthen consumer protection while facilitating ease of compliance, especially for low-risk customers and those in rural and remote areas.
Key Amendments Introduced:
- Extended Timeline for Low-Risk Customers: Regulated Entities (“REs”) shall now be required to continue allowing transactions for individual customers classified as low-risk, even if their KYC updation has been overdue. These customers must be allowed to complete their KYC updation up to 1 (one) year from the due date or by June 30, 2026, whichever is later.
- Role of Business Correspondents(“BCs”): Banks have been permitted to utilize authorized Business Correspondents for facilitating KYC updation, particularly where there is no change in KYC information or only an address update. Customers can submit a self-declaration and supporting documents through BCs. This can be done electronically through biometric-based e-KYC authentication or, until such systems are fully operational, in physical form. The BC shall be required to verify the documents, forward them to the relevant bank branch, and provide customers with an acknowledgment. The bank must then update the customer’s records and confirm the same. Importantly, while BCs can facilitate the process, the ultimate responsibility for KYC compliance and periodic updation remains with the bank.
- Advance and Reminder Notifications for KYC Updation: To ensure timely compliance, REs are now obligated to proactively notify customers regarding upcoming KYC updation deadlines. This includes:
- Advance Notice: A minimum of three communications before the due date, with at least one by physical letter.
- Post-Due Reminders: If the customer does not comply, at least three further reminders must be sent, again including at least one by letter.
These communications must be spaced appropriately and contain clear instructions for updating KYC, an escalation mechanism for support, and an explanation of consequences for non-compliance. All such communications must be logged in the RE’s system for audit purposes. The implementation of this notification system must be completed by January 1, 2026.
[1] https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12866&Mode=0