The Reserve Bank of India (RBI) has issued fresh guidelines aimed at easing the process of know-your-customer (KYC) updates, especially for accounts linked to government benefit transfers such as Pradhan Mantri Jan Dhan Yojana (PMJDY) and direct benefit transfer (DBT). However, RBI circular, once again falls short of delivering concrete protections for bank customers who continue to face harassment over periodic KYC compliance.
As part of its revised guidelines, RBI has outlined a simplified process for KYC updation to ease the burden on customers. Regulated entities (REs), including banks, can now accept self-declarations from customers confirming either no change in their KYC details or only an address update. These declarations can be submitted via digital and non-digital channels, such as the customer’s registered email or mobile number, ATMs, online banking, mobile apps, physical letters, or through business correspondents (BCs).
KYC updation can also be done at any branch of the bank or RE where the customer holds an account. Additionally, Aadhaar one-time passcode (OTP)-based e-KYC and video-based customer identification process (V-CIP) are permitted for KYC updates. Banks have also been instructed to automatically update customer records based on notifications received from the Central KYC Registry (CKYCR), RBI says.
In
a circular issued on 12 June 2025, RBI acknowledged a large pendency in KYC updates, particularly for basic savings accounts under government welfare schemes. To address this, the regulator has allowed banks to use business correspondents (BCs) to facilitate the KYC updation process, permitted the use of Aadhaar OTP-based e-KYC and video-based customer identification process (V-CIP) and encouraged banks to run special KYC update camps, especially in rural and semi-urban areas.
Further, banks have been directed to take a more empathetic approach, while dealing with accounts rendered inactive due to KYC delays, and to facilitate their reactivation. RBI also emphasised that KYC updation can now be done at any branch, using both digital and non-digital means, including registered mobile or email, ATMs, or even a simple self-declaration for those with no change in details.
In its draft proposal, RBI has proposed to allow low-risk customers to conduct all transactions, while ensuring the updation of KYC within one year of its falling due for KYC or up to 30 June 2026. "For individual customers classified as low risk, REs must continue to allow all transactions even if their KYC is due for periodic updation. However, the KYC must be updated within one year from the due date or by 30 June 2026 — whichever is later. These accounts must still undergo regular monitoring. This relaxation also applies to low-risk customers whose KYC updates are already overdue."
However, in the circular, RBI has dropped the proposal on KYC updation for low-risk customers.
Earlier this week, Union minister of finance Nirmala Sitharaman underscored the importance of simplifying and digitalising the KYC process across the entire financial sector. She called on regulators to prescribe common KYC norms and enhance digital onboarding—especially for non-resident Indians (NRIs), persons of Indian origin (PIOs) and overseas citizens of India (OCIs) participating in the Indian securities market—to ensure that every citizen experiences a seamless interface, whether claiming unclaimed funds or opening a new account.
The revised circular on KYC issued by RBI does offer a consolidated snapshot of simplified KYC processes. These include the use of e-KYC via Aadhaar, V-CIP as an alternative to in-person verification, and allowance for customers to declare changes via registered communication channels. But these changes are cosmetic unless accompanied by strict enforcement, accountability, and penalties for banks that violate norms.
As pointed out by Moneylife repeatedly, despite the liberalisation of procedures, RBI circular once again sidesteps the core issue—banks freezing accounts without due warning or clarity, and without facing any penalties for such actions. Customers frequently report being subjected to account freezes without proper notification, forced to make multiple visits to branches, or being asked to re-submit documents already available with the CKYCR. Despite existing guidelines requiring banks to issue at least three warnings before freezing accounts, implementation on the ground remains inconsistent.
Moneylife's managing editor, Sucheta Dalal, in her recent column, also highlighted how RBI has yet to implement an enforceable, standardised operating procedure (SOP) for banks, despite multiple recommendations from internal committees and public outcry. "Anyone who has searched online for ‘KYC updation’ will find thousands of horror stories involving frozen accounts and repeated bank visits, despite the mandatory obligation on banks to send three warning notices. But RBI appears satisfied with simply tweaking the rules and offering minor concessions, instead of a concrete, enforceable framework with strict accountability."
For instance, the high-level committee on customer service, chaired by former deputy governor BP Kanungo, had submitted a comprehensive report in 2023 with detailed recommendations for improving KYC practices. These included time-bound procedures, traceable reminders, model claim forms, and a strong emphasis on accountability for wrongful account freezes. Yet, none of these have been translated into binding mandates. (Read:
RBI’s Draft KYC Proposals: More Tinkering, Still No Teeth)
While RBI has positioned the latest KYC circular as a step toward greater customer convenience, many believe that the regulator is still hesitant to confront the powerful banking sector over its recurring failures in customer service. Unless the RBI mandates enforceable SOPs, with built-in grievance redressal and punitive measures for non-compliance, India’s banking customers may continue to suffer the same ordeal—frozen accounts, missing funds, and endless branch visits in the name of KYC compliance.
Here is the process of onboarding a customer and the updation/ periodic updation of KYC as per the RBI circular...
A. Face-to-face mode for onboarding the customer
(i) Customer may be onboarded in face-to-face mode through Aadhaar biometric-based e-KYC authenticating and, in such case, if customer wants to provide a current address, different from the address as per the identity information available in the UIDAI database (i.e., Central Identities Data Repository), he may give a self-declaration to that effect to the RE.
(ii) Further, Digital KYC process is also allowed for customer onboarding.
B. Non-face-to-face (NFTF) modes for onboarding the customer
(i) Consent-based onboarding of customer in NFTF mode may be done using Aadhaar OTP based e-KYC authentication which is subject to certain conditions (ref. paragraph 17 of the Master Direction on KYC). Further, such account shall be placed under strict monitoring, and customer due diligence (CDD) procedure shall be completed within a year.
(ii) Customer onboarding in NFTF mode using digital modes such as KYC Identifier, equivalent e-documents, documents issued through DigiLocker, and non-digital modes such as obtaining copy of OVD certified by additional certifying authorities as allowed for NRIs and PIOs are subject to certain conditions
C. Customer onboarding using Video based Customer Identification Process (V-CIP)
(i) V-CIP is an alternate method of CDD by an authorised official of the RE by undertaking seamless, secure, live, informed and consent based audiovisual interaction with the customer to obtain identification information required for CDD purpose.
(ii) V-CIP is treated on par with face-to-face onboarding.
D. Simplified process of updation and periodic updation of KYC
(i) Self-declarations - REs are allowed to obtain self-declaration regarding “no change in KYC information” or “a change only in address details” from customers using digital and non-digital modes, through customer’s email / mobile number registered with the RE, ATMs, digital channels (such as online banking / internet banking, mobile application of RE), letter, BCs, etc.
(ii) The updation/ periodic updation of KYC records are allowed to be carried out at any branch of the RE with which customer maintains the account.
(iii) Aadhaar OTP based e-KYC and V-CIP are permitted for the purpose of updation/ periodic updation of KYC.
(iv) The REs have been directed to update customers’ KYC information/ records based on the update notification received from CKYCR.
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