Major Relief for Bank Customers: RBI Eases KYC Update Process via Banking Correspondents
Major Relief for Bank Customers: RBI Eases KYC Update Process via Banking Correspondents
New rules simplify periodic KYC updates; banks must issue advance notices to customers
In a major move aimed at making the Know Your Customer (KYC) process more accessible and hassle-free, the Reserve Bank of India (RBI) has announced significant relaxations in its KYC guidelines through a notification dated June 12, 2025. One of the key developments is the authorization of banking correspondents (BCs) to carry out KYC updates, including periodic updates, for bank customers.
This amendment allows individuals including local kirana shop owners affiliated with banks, self-help groups, NGOs, microfinance institutions, and other civil society organisations to function as BCs and assist customers in updating their KYC information. These BCs can now collect self-declarations and supporting documents from customers who have either had no change in their KYC details or only need to update their address. The information can be captured electronically or physically and then sent to the bank for processing, after biometric-based e-KYC authentication when necessary.
Customers will also receive an acknowledgement from the BC for any submissions made, and banks are responsible for notifying customers once their KYC information is successfully updated in the system. However, RBI reiterated that the ultimate responsibility for ensuring timely KYC updation lies with the concerned bank.
To further support customers, especially in rural and semi-urban areas, the RBI has mandated that banks provide at least three advance notifications, including one via physical letter, before the due date for KYC update. In case of non-compliance by the due date, banks must follow up with three additional reminders, again including one letter. These communications must offer clear instructions for the KYC process, details of support mechanisms, and consequences of non-compliance. All notifications and reminders must be logged in the bank’s system for audit purposes, and banks are expected to implement this protocol by January 1, 2026.
The RBI emphasized that this decision follows concerns over a backlog in KYC updates, particularly in accounts linked to Direct Benefit Transfer (DBT), Electronic Benefit Transfer (EBT), and government schemes such as the Pradhan Mantri Jan Dhan Yojana (PMJDY). Delays in KYC compliance had reportedly led to disruptions in the disbursal of subsidies, scholarships, and welfare payments.
To address this, banks have been urged to organize awareness drives, camps, and special outreach efforts to help customers, especially in regions with large pending KYC updates. An empathetic approach has been recommended for reactivating such accounts.
In addition to the BC framework, the RBI has outlined a range of simplified KYC processes to enhance accessibility and security:
- Customers can now onboard through face-to-face Aadhaar biometric-based e-KYC. A declaration can be submitted if the current address differs from the one in the Aadhaar database.
- Digital KYC and non-face-to-face (NFTF)Â modes using Aadhaar OTP, DigiLocker documents, or certified copies are permissible under certain conditions.
- The Video-based Customer Identification Process (V-CIP) has also been permitted for KYC onboarding and updates, offering a secure, real-time method for remote verification.
- KYC records can now be updated using self-declarations through various channels—email, registered mobile numbers, internet banking, ATMs, mobile apps, letters, and banking correspondents.
- Banks may also act on KYC update notifications received via the Central KYC Records Registry (CKYCR).
However, a previous proposal to exempt low-risk customers from periodic KYC updates has been dropped.
This development aligns with recent remarks made by Union Finance Minister Nirmala Sitharaman, who emphasized the need for a unified, digital-first KYC framework across India’s financial ecosystem. She urged regulators to adopt common KYC norms and ensure smooth digital onboarding for non-resident Indians (NRIs), persons of Indian origin (PIOs), and overseas citizens of India (OCIs), especially for participation in the securities market and access to unclaimed funds.
With these changes, the RBI aims to ensure that every banking customer, irrespective of location or literacy can manage their KYC requirements without undue delay or difficulty.
