Background
The Reserve Bank of India (“RBI”) on May 23, 2025, has invited public comments on the draft circular Reserve Bank of India KYC (Amendment) Directions, 2025 (hereinafter referred to as “Amendment”) on ‘Updation/ Periodic Updation of KYC– Revised Instructions’. This constitutes a strategic recalibration of the existing Master Direction – Know Your Customer (KYC) Directions, 2016, with the express purpose of streamlining periodic KYC updation and reducing operational friction for low-risk retail customers.
Further, by extending compliance timelines, empowering Business Correspondents (“BCs”), mandating robust communication cadences and enshrining customer-centric initiatives, the amendments seek to strike an optimal balance between regulatory rigour and service efficiency. This targeted intervention aligns with the broader objectives of financial inclusion, risk-based supervision, and technological enablement, thereby enhancing the overall integrity of India’s Anti-Money Laundering (AML) framework.
Key Amendments
- Extended Renewal Timeline for Low-Risk Customers
Regulated Entities (“REs”) shall permit continued operation of accounts for individual customers classified as “low‑risk” until the later of (a) one year post their scheduled KYC renewal date or (b) 30 June 2026.
- Business Correspondent (BC) Empowerment
Previously, BCs had a limited and largely facilitative role in the periodic KYC updation process, primarily restricted to assisting customers in accessing banking services in remote areas. They were not formally authorised to collect or process KYC documentation, nor were they mandated to authenticate or submit self-declarations on behalf of customers. Their involvement was peripheral, with the core responsibility for KYC compliance resting solely with the bank branches.
However, under the revised regulatory framework, their role has been significantly formalised and expanded, with specific responsibilities outlined as follows:
i. Scope of Authority: BCs may now capture self-declarations for (i) no‑change KYC and (ii) change of address only, after successful Aadhaar biometric eKYC verification.
ii. Process Requirements:
a. Digital recording of declarations via prescribed templates.
b. Issuance of system-generated acknowledgements to customers.
Physical forms, where required, to be channelled expeditiously to the servicing branch.
- Structured Communication Cadence
Previously, the regulatory framework did not prescribe specific requirements regarding advance notifications or reminders for KYC updation. However, the revised clause now mandates that Regulated Entities (REs) shall:
i. Pre‑Due Date Notices: At least three advance intimations shall be issued, one of which shall be via postal letter.
ii. Post‑Due Date Reminders: A minimum of three reminders is required, utilising diverse channels (SMS, email, call).
iii. Record‑Keeping: All communications shall be time‑stamped and logged within an auditable tracking system to demonstrate regulatory due‑diligence.
- Customer‑Centric Outreach Initiatives
i. Targeted Campaigns: REs shall prioritise rural and semi‑urban branches exhibiting high KYC pendency, organising door‑to‑door drives, outreach camps, and dedicated walk‑in days.
ii. Activation Protocols: Aligned with the December 2024 circular, banks shall adopt compassionate reactivation workflows for dormant accounts, reducing attritional loss of low‑balance customers.
- Consolidated Onboarding & Updation Mechanisms
i. Onboarding Modalities:
a. Face‑to‑face: Customer onboarding through Aadhaar-based biometric e-KYC authentication.
b. Non‑face‑to‑face: Aadhaar OTP, CKYCR downloads, DigiLocker retrievals, Video‑Customer Identification Process (Video‑CIP).
ii. Periodic Updation Channels: Customers may update their KYC through multiple digital touchpoints including internet banking, mobile applications, ATMs, and registered email. Business Correspondent (BC) facilitation continues to be an integral offline channel for customer segments with limited digital access.
iii. Inter‑Branch Flexibility: REs are required to facilitate KYC updation at any of their branches, irrespective of the customer’s home branch, provided system interoperability and real-time data synchronisation are maintained.
Conclusion
The decentralisation of compliance functions to BCs, supported by biometric authentication and simplified documentation, empowers banks to maintain regulatory rigour without compromising on outreach. This move is especially significant in the context of rural and semi-urban financial ecosystems, where BCs serve as the primary interface between the customer and the formal banking system. The approach reflects a calibrated balance between regulatory oversight, risk-based due diligence, and enhanced service delivery, fostering financial inclusion and procedural robustness.
Disclaimer
The note is prepared for knowledge dissemination and does not constitute legal, financial or commercial advice. AK & Partners or its associates are not responsible for any action taken based on its contents.
