Reserve Bank of India (Know Your Customer (KYC)) (Amendment) Directions, 2025

Introduction

The Reserve Bank of India (RBI) issued the Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016 to ensure compliance with the Prevention of Money Laundering Act (PMLA), 2002 and associated rules. To enhance consumer protection and improve banking services, RBI has introduced further changes through the Reserve Bank of India (KYC) (Amendment) Directions, 2025. These amendments, effective immediately, aim to streamline KYC procedures, particularly for low-risk customers, and introduce mechanisms for efficient communication and customer service.

Key Explanations

1. Extended KYC Updation Timeline for Low-Risk Customers

A major highlight of the amendment is the relaxation in KYC updation timelines for individual customers classified as low risk. Regulated Entities (REs) must now allow all transactions for such customers and ensure KYC is updated within one year of the due date or by June 30, 2026, whichever is later. This extension also applies to low-risk customers whose KYC updation is already overdue. Regular account monitoring will continue to ensure compliance.

2. Business Correspondents (BCs) Empowered for KYC Updation

Banks can now leverage their Business Correspondent (BC) network to facilitate KYC updates, especially in remote or underserved areas. Customers can submit self-declarations regarding unchanged KYC information or address changes through authorized BCs. These can be recorded electronically after biometric e-KYC authentication. Until electronic options are fully implemented, physical submissions are permitted. BCs must authenticate and forward documents promptly, providing customers with acknowledgments. However, the onus for periodic KYC updation remains with the bank.

3. Enhanced Customer Communication for KYC Updates

To ensure customers are well-informed, RE’s are now required to send at least three advance notifications—including at least one by letter—before the KYC update due date. If the customer does not comply, three additional reminders (again, with at least one by letter) must be sent after the due date. These communications will include clear instructions, escalation mechanisms, and information on possible consequences of non-compliance. All such communications must be recorded in the RE’s system for audit purposes. This process must be fully implemented by January 1, 2026.

Conclusion

The RBI’s latest amendments to the KYC Directions reflect a balanced approach—strengthening anti-money laundering safeguards while prioritizing customer convenience and protection. By extending timelines for low-risk customers, empowering Business Correspondents, and mandating robust customer communication, the RBI aims to make banking more accessible and user-friendly, without compromising on regulatory standards. Banks and customers alike should familiarize themselves with these changes to ensure smooth compliance and uninterrupted banking services