Mumbai: The RBI on Wednesday relaxed KYC (know-your-customer) norms to enable the process to be completed remotely and prevent banks from freezing accounts in which such data has not been updated.
“In respect of customer accounts where periodic updation of KYC is due and pending as on date, no restrictions on operations of such account shall be imposed till December 31, 2021, for this reason alone, unless warranted under instructions of any regulator/ enforcement agency/ court of law,” the RBI said in a circular to all lenders. Earlier, SBI had given similar instructions to its branches after a directive from the finance minister through a tweet.
While the central bank’s directive gives relief to customers of all RBI-regulated entities, a larger reform is the enabling of digital KYC. Currently, banks are completing the KYC process for individuals remotely using video-based customer identification (V-CIP). This process has been extended for businesses including proprietorship firms, authorised signatories and beneficial owners of legal entities.
Earlier, accounts opened using Aadhaar-based e-KYC (non-face-to-face) were treated as ‘limited KYC’ accounts. These will now be treated as fully compliant accounts. Entities looking to complete the KYC process can now use KYC Identifier of Centralised KYC Registry (CKYCR) for V-CIP and submission of electronic documents (including documents issued through DigiLocker) as identify proof.
“The RBI allowing video KYC & other digital methods to complete many requirements for renewal and new KYC will ease access to formal banking and digital payments. It is timely and will have long-term positive impact,” said Paytm founder Vijay Shekhar Sharma.
Besides opening savings accounts, digital KYC will also make lending easier. According to LenDenClub CEO and co-founder of Bhavin Patel, the CKYCR push will make it easy for lenders to verify customers at the lending point and further strengthen the ecosystem. “Major banks are already part of central-KYC registry and now fintech companies like us have already registered to ensure better digital and hassle-free experience for customers in need,” said Patel.