In May 2025, the Reserve Bank of India (RBI) released a draft circular titled “Updation/Periodic Updation of KYC – Revised Instructions”, proposing amendments to the existing Know Your Customer (KYC) Master Directions(MD).
- These proposed changes aim to streamline the KYC process, reduce compliance burdens, and enhance customer convenience, particularly for low-risk individuals and beneficiaries of government welfare schemes.
- The RBI has proposed an amendment to its earlier circular issued in January 2024.
Note: KYC is a process where financial institutions verify customer identities to prevent illegal activities like money laundering and terrorism financing.
Key Proposals:
1.KYC Updation at Any Branch:
Banks shall permit customers to update their KYC details at any branch, including non-home branches, for the purpose of reactivating dormant or inoperative accounts.
2.Use of Video KYC (V-CIP):
Upon customer request, banks may facilitate remote KYC updation through Video-based Customer Identification Process (V-CIP), subject to the availability of this facility within the respective bank.
3.Assistance by Business Correspondents (BCs):
Banks may engage authorised BCs to collect KYC documents and assist customers in the reactivation of inoperative accounts. This move is expected to enhance service outreach, particularly in rural and remote areas.
- These changes align with the broader KYC MD of 2016.
RBI’s Previous Amendments to KYC Norms:
RBI announced six key amendments to the MD on KYC to align with recent regulatory changes effective from 6 November 2024 to strengthen India’s financial system.The amendments aim to align the KYC framework with:
- Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (amended via Gazette Notification dated 19th July 2024).
- Government’s Unlawful Activities (Prevention) Act(UAPA), 1967 guidelines (revised via corrigendum dated 22nd April 2024).
Key Amendments:
1.Customer Due Diligence (CDD):Financial institutions (called Reporting Entities, REs) must apply the CDD process at the Unique Customer Identification Code (UCIC) level. Existing KYC-compliant customers opening new accounts with the same RE are exempt from repeating the CDD process.
2.High-Risk Monitoring: Enhanced monitoring for high-risk accounts is applicable to all relevant sub-paragraphs.
3.KYC Updation: The term “periodic updation” replaces “updation” to clarify timelines:
- High-risk customers: Every 2 years
- Medium-risk: Every 8 years
- Low-risk: Every 10 years
4.Central KYC Records Registry (CKYCR) Integration: REs must upload/update KYC records to the CKYCR within 7 days of receiving new customer information.
- For new services, REs must use the KYC Identifier from CKYCR instead of requesting duplicate documents, unless data is outdated, incomplete, or enhanced due diligence is needed.
5.UAPA Nodal Officer Designation Change:
The Central Nodal Officer under the UAPA is now designated as the Joint Secretary (Counter Terrorism and Counter Radicalization, CTCR), Ministry of Home Affairs (MHA), replacing the Additional Secretary, per the Government of India(GoI)’s corrigendum (22nd April 2024).
6.Terminology Standardization: References to “section” have been replaced with “paragraph” throughout the Master Direction to ensure consistency and enhance clarity.
Recent Related News:
In April 2025, Mumbai (Maharashtra)-based Reserve Bank of India (RBI) has issued revised directions regarding the opening and operation in the deposit accounts of minors.
- As per RBI directions, minors above the age 10 are now allowed to open and operate their own savings as well as term deposit accounts independently, subject to limits and terms defined by individual banks. These directions came into force from April 21, 2025.
