RBI Amends KYC Norms to Enhance Consumer Convenience and Compliance
The Reserve Bank of India (RBI) has issued a set of amendments to its Know Your Customer (KYC) Directions, 2016, aimed at improving customer service, simplifying periodic KYC updation processes, and strengthening regulatory compliance. The updated guidelines, titled Reserve Bank of India (Know Your Customer (KYC)) (Amendment) Directions, 2025, came into immediate effect and are applicable across all Regulated Entities (REs).
The amendments were issued under various statutory powers granted to the RBI under the Banking Regulation Act, Reserve Bank of India Act, Foreign Exchange Management Act, and Prevention of Money-Laundering Rules. These changes reflect the RBI’s continued focus on balancing customer convenience with the need to maintain the integrity of the financial system.
Key Highlights of the Amendments:
- Extended Timeline for Low-Risk Customers
For individual customers categorized as low-risk, REs must allow transactions to continue and ensure KYC is updated within one year of the due date or by June 30, 2026—whichever is later. This provides relief to a large segment of customers, particularly those with clean transaction histories. - Use of Business Correspondents (BCs)
Banks may now leverage their Business Correspondents to facilitate KYC updates. Customers can submit self-declarations (in case of no change or change in address only) through BCs. The declaration can be provided electronically following biometric e-KYC authentication. Where electronic options are unavailable, physical declarations are allowed. The BC is responsible for forwarding these to the bank and issuing a receipt to the customer. - Mandatory Intimation and Reminder Protocols
REs are now required to issue at least three advance KYC update intimations—including one via physical letter—before the due date. If customers fail to comply, three additional reminders, including at least one by letter, must be sent after the due date. All communication must include simple instructions, escalation options, and consequences of non-compliance. This system must be implemented by January 1, 2026, and all actions must be logged for audit purposes.
These changes underline RBI’s efforts to digitize compliance processes, enhance customer engagement, and prevent service disruptions due to KYC delays. By easing KYC updation for low-risk customers and allowing BCs to support the process, the amendments promote financial inclusion while maintaining robust anti-money laundering safeguards.
