RBI eases KYC norms: Simplifies update process, extends deadline for low-risk customers

The central bank has asked banks and regulated entities to send a minimum of three reminders to customers regarding KYC updates, both before and after the due date.

The Reserve Bank of India (RBI) amended its instructions on KYC (Know Your Customer) updates on June 12, allowing Business Correspondents (BCs) to facilitate the process, and mandating advance notice for KYC reminders, among other changes.

The RBI said it has noted a significant backlog in periodic KYC updates, including in accounts opened for receiving Direct Benefit Transfers (DBT) or Electronic Benefit Transfers (EBT) for  various government schemes, as well as accounts opened under the Pradhan Mantri Jan-Dhan Yojana (PMJDY).

“The RBI’s revised KYC guidelines are a vital step towards promoting equitable financial access while strengthening governance, compliance, and customer protection,” says Anand Kumar Bajaj, Founder, MD & CEO of fintech firm PayNearby. Timely KYC updates are crucial to prevent account misuse and to combat financial fraud, he added.

The RBI has permitted banks to use the services of authorised BCs to collect self-declarations from customers with unchanged KYC details or only address changes. BCs can electronically collect this data via biometric e-KYC or temporarily accept physical forms.

After collecting the documents, the BC authenticates and submits them to the bank, which then updates the customer's KYC details and notifies them upon completion. However, the bank retains the final responsibility for ensuring that the KYC update is successfully completed.

“By enabling BCs to assist with these updates, banks can efficiently reach customers in areas with limited branch presence,” says Bajaj. This empowers citizens in remote and underbanked regions who can now visit a nearby retail outlet to update their KYC digitally and securely, he adds.

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Low-risk individual customers can now continue transactions without interruptions, even if their KYC update is pending. They have the flexibility to update their KYC details by June 30, 2026, or within a year of the original due date, whichever is later. Meanwhile, their accounts will be regularly monitored by regulated entities (REs) to ensure security and compliance.

According to RBI guidelines, low-risk customers typically include individuals such as salaried employees with well-defined salary structures and those from lower economic strata with small balances and low account turnover.

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The central bank has asked banks and regulated entities to send a minimum of three reminders to customers regarding KYC updates, both before and after the due date, to ensure timely compliance.

At least one of these reminders must be a letter, while the rest can be communicated through various channels, including SMS to the customer's registered mobile number and email.

The reminder letter should include clear instructions for updating KYC details, an escalation process for assistance, and the potential consequences of delays or non-compliance. Banks must record the issuance of reminders in their system for each customer, maintaining an audit trail. REs are required to implement these reminder systems by January 1, 2026.

The RBI has also advised banks to organise camps and launch intensive campaigns, including special drives, to focus on periodic KYC updates, especially for rural and semi-urban branches, as well as those with a large backlog of pending KYC updates.