Background
The Reserve Bank of India (“RBI“) on June 12, 2025 issued the Reserve Bank of India (Know Your Customer (KYC)) (Amendment) Directions, 2025 (“Amendment Directions”) to modify the Reserve Bank of India (Know your Customer (KYC)) Directions, 2016 (“Master Direction”). These Amendment Directions will come into force with immediate effect on June 12, 2025.
Key updates under the Amendment Directions
Extension of KYC updation window for low‑risk individuals (Para 38)
The Amendment Directions adds a new clause before Paragraph 38 (a) of the Master Directions. As per the Amendment Directions, Regulated Entities (“REs”) shall all low risk individual customers to complete periodic KYC up to one year after due date or upto June 30, 2026 whichever is later. Further, this is applicable for those low risk customers for whom periodic updation of KYC has already fallen due. The RE shall also subject accounts of such customers to regular monitoring. This overall extends the window for the updation of the low risk customer window to mid 2026 and offer a major relief to them which will directly improve retention.
Business Correspondent led KYC Updates by banks (Para 38(a)(iia))
Additionally, as per the paragraph 38(a)(iia) inserted by the Amendment Directions, banks may leverage authorised Business Correspondents (“BCs”) for self‑declaration in respect of unchanged KYC particulars or address updates. The bank shall obtain self‑declarations and supporting documents, that shall be captured electronically in bank systems post successful biometric e‑KYC authentication. Until electronic submission is enabled, physical documents are permissible, but ultimate responsibility for updation of KYC remains with the bank. 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 acknowledgment of receipt of such declaration / submission of documents. The bank 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.
The banks will now upgrade core banking and BC systems to capture self-declarations electronically and integrate biometric e KYC platforms.
Due Notice for Periodic Updation of KYC (Para 38(e))
As per paragraph 38(e), REs shall issue three advance intimations including at least one intimation by letter before the due date and three reminders including at least one reminder by a letter after the due date for periodic KYC updation. Such communications shall be sent at appropriate intervals using available communication options/channels. It is to be noted that the communications by the REs shall outline instructions, escalation mechanisms and consequences of non‑compliance. REs shall take a note that the Amendment Directions prescribes them to record the advance intimation/reminder sent to each customer in their system for audit trail. Further, the REs have to implement the requirements by January 1, 2026.
The REs will now have to maintain a detailed tracking of all notices and reminders for audit trails. Consequently, inadequate documentation may result in adverse findings during statutory or internal audits. Non implementation by stipulated deadlines (January 1, 2026) may trigger enforcement action by RBI under its penal powers, including monetary penalties and reputational sanctions.
Conclusion
The Amendment Directions represent a calibrated balance between customer convenience and regulatory rigour, extending relief to low risk individuals while reinforcing procedural discipline through enhanced notice requirements and technological integration. REs shall prioritise policy alignment, system readiness and staff training to mitigate compliance risks and safeguard customer relations. Timely execution of these measures will not only ensure adherence to RBI’s mandates but also bolster operational resilience and regulatory credibility.
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.
