The Reserve Bank of India (RBI) has announced new modifications to Know Your Customer (KYC) guidelines, with the regulator intending to optimise how financial institutions verify identities. In a bid to further scale security in India and ensure a safe environment for both financial institutions and individuals, RBI made key alterations to KYC regulations.

These adjustments work towards augmenting how financial institutions conduct identity verification procedures on their customers and ensuring a more simplified and safe process. The move comes after RBI imposed a fine of USD 49,562 on Manappuram Finance Limited for not adhering to KYC guidelines. The monetary penalty was due to the company’s failings and responsibilities as a payment system operator.  The regulator also fined Ola Financial Services with USD 39,891 and Visa Worldwide with USD 286,622 for regulatory violations.

Both Manappuram Finance and Ola Financial Services were discovered to have breached KYC regulations, with the announcement coming after the latter disclosed a possible USD 2,388,712 fraud carried out by an employee at its subsidiary. RBI’s changes to KYC guidelines By introducing these updated regulations, RBI aims to optimise the KYC process for both customers and financial institutions, as they ensure improved data sharing between organisations, encourage timely updates, and solidify measures against illicit activities. Among these modifications, the central bank mentions: Customer identification for several accounts, with financial institutions now being able to not remake the Customer Due Diligence (CDD) procedures if an existing KYC-compliant individual opens a new account or wants to leverage additional services with the same bank; Clarifications regarding high-risk accounts monitoring, with the regulator requiring all financial institutions to intensely monitor them to detect any suspicious activity; Periodic KYC updates, with customers now needing to regularly revise their information; Uploading KYC details to the Central KYC Records Registry (CKYCR) if a customer’s information changes.

This aims to support the centralisation of KYC records and optimise how institutions retrieve updated data. The regulator imposed a seven-day period for sending the records after the financial institution receives the updated information; KYC identifier from the CKYCR, allowing financial institutions to recover KYC records more efficiently; Explanations regarding Unlawful Activities Prevention Act (UAPA) compliance; Terminology updates, with all references to ‘section’ in the KYC Master Directions now being referred to as a ‘paragraph’, which in turn intends to ensure consistency in the document. When it comes to consumers, the newly upgraded rules can provide them with accelerated processing for account openings and minimised complexities when updating their KYC details.

At the same time, financial institutions can benefit from more simplified and secure access to customers’ KYC data, which in turn makes the procedure more efficient. Source: Link .