New Delhi — Aimed at improving financial inclusion and simplifying compliance, the Reserve Bank of India (RBI) has amended key Know Your Customer (KYC) procedures. A notification issued on June 12, 2025, introduces new flexibilities in KYC updation and customer onboarding, including allowing Banking Correspondents (BCs) to update customer KYC records and requiring banks to issue multiple advance notifications before periodic KYC deadlines.
These changes are expected to address challenges faced by underbanked populations, especially beneficiaries of Direct Benefit Transfer (DBT) schemes and rural account holders under PM Jan Dhan Yojana (PMJDY), whose accounts often become inactive due to KYC delays.
BCs Can Now Handle KYC Updates: Major Boost for Rural Outreach
One of the most impactful updates is the RBI’s decision to authorize Banking Correspondents (BCs) to carry out periodic or one-time KYC updates. BCs are often local individuals or groups like self-help groups (SHGs), NGOs, MFIs, and even kirana store owners, contracted by banks to act as their service agents in remote areas.
According to the revised guidelines:
- Self-declarations for “no change” or “address change only” in KYC data can now be submitted through an authorized BC.
- These declarations, once authenticated via biometric-based e-KYC, can be recorded digitally in the bank’s system.
- If digital options are unavailable, customers may submit physical declarations, which BCs must authenticate and promptly send to the bank branch.
- BCs are required to issue receipts for all submissions, and banks must update KYC records and notify customers once processed.
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However, RBI emphasized that banks remain ultimately responsible for ensuring timely KYC compliance and must verify all records accordingly.
Mandatory Advance and Reminder Notices for KYC Updation
In a customer-first approach, the RBI now requires all Regulated Entities (REs) to provide multiple alerts to customers ahead of KYC deadlines:
- Three advance notices must be sent before the KYC due date, including one mandatory letter.
- If customers still fail to comply, three additional reminders must follow after the due date.
- These communications must contain clear instructions, grievance redressal details, and mention the consequences of non-compliance.
The process must be fully recorded in the bank’s internal systems for audit purposes. RBI has instructed banks to begin implementing these systems immediately, with a deadline of January 1, 2026.
Digital KYC Options, V-CIP, and KYC Simplification Measures Detailed
To ensure seamless onboarding and periodic KYC, the RBI also outlined four simplified modes:
- Face-to-Face Aadhaar e-KYC
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- Customers may submit a different current address via self-declaration.
- Aadhaar-based biometric authentication remains primary.
- Non-Face-to-Face (NFTF) Onboarding
- Aadhaar OTP-based e-KYC with tight restrictions and a one-year validity until full CDD is completed.
- Other digital documents like those from DigiLocker, and certified documents for NRIs/PIOs, are acceptable.
- Video-Based Customer Identification Process (V-CIP)
- Treated equivalent to physical verification.
- Allows live, secure, and consent-based video interactions between customer and bank officer.
- Simplified KYC Updates
- Self-declarations via mobile, email, ATM, online platforms, or BCs.
- Aadhaar OTP and V-CIP now permitted for KYC updates.
- Any bank branch may now assist with a customer’s KYC update.
- KYC can also be updated based on alerts from Central KYC Registry (CKYCR).
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Push for KYC Camps and Financial Inclusion
Responding to growing delays in KYC updation—especially affecting DBT transfers and scholarship disbursements—RBI directed banks to:
- Launch intensive campaigns and special KYC camps.
- Focus on rural and semi-urban branches with high pendency.
- Take an empathetic view when reactivating accounts, ensuring access to welfare funds is not blocked.
Industry experts welcomed the move. Shikhar Aggarwal, Chairman of BLS E-Services, noted that the guidelines would streamline customer onboarding, reactivate dormant accounts, and boost access to formal banking services.
