RBI revises its KYC guidelines

• The Reserve Bank of India (RBI) on Friday updated its know your customer (KYC) guidelines putting onus on Aadhaar for customer verification and due diligence by banks and financial institutions.

• The move is aimed at ensuring that no account is opened in an anonymous or fictitious name.

=> Highlights

• Entities regulated by RBI,such as banks, non-banking finance companies (NBFCs), payment system providers (PSPs) and prepaid payment instrument issuers (PPI Issuer) have been instructed to formulate a KYC policy which shall include a customer acceptance policy, risk management strategies, procedure for customer identification and means to monitor transaction of customers.

• Regulated entities (REs) have to ensure that no account is opened where the RE is unable to apply appropriate customer due diligence (CDD) measures, either due to non-cooperation of the customer or non-reliability of the documents/information furnished by the customer

• However, these entities have to be careful that additional information is obtained with the explicit consent of the customer.

=> Customer categorization

• Customers shall be categorised as low, medium and high risk category, based on the assessment and risk perception of the RE, “provided that various other information collected from different categories of customers relating to the perceived risk, is non-intrusive and the same is specified in the KYC policy

=> Reason for new norms

• The norms have been revised because the government had amended laws on prevention of money laundering.

=> Benefits

• This will make KYC process easy and cost effective for banks.

• It will also make bank account opening easy and convenient for the people in a hassle free manner with Aadhaar based eKYC

=> Context

• The use of “officially valid documents” to establish address and identity proof of customers have been restricted to cases where enrolment for Aadhaar is not possible.

• However, RBI has also said the new norms are subject to the final judgment of the Supreme Court on Aadhaar.

Link : https://wt6q7.app.goo.gl/vcKS3GAhAkZ8Ux4H3

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