The Reserve Bank of India (RBI) directed banks and other regulated financial entities to not impose any punitive action against customers for failure to update KYC (know-your-customer) documents till the end of the year. RBI Governor Shashikanta Das made this announcement on May 5 in an unscheduled address to deliberate on measures to tackle the second wave of COVID-19 cases.
The announcement comes as a huge relief to account holders as many banks required customers to visit their branch office in order to refresh their KYC during the second wave of the pandemic. According to RBI guidelines, periodic update of KYC is mandatory at least once every two years for high-risk customers, once every eight years for medium-risk customers, and once every ten years for low-risk customers.
“Keeping in view the current COVID-19 related restrictions in various parts of the country, regulated entities are advised that in respect of the 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, etc,” said the Governor in his address.
This order ensures that customers whose KYC norms need to be updated on a regular basis will be able to use their accounts without limitation before the end of the year. For the convenience of users, the RBI has also permitted the use of digital platforms for regularly updating KYC. They have allowed video KYC and submission of electronic documents through DigiLocker.
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According to the central bank, digital KYC refers to recording the customer recording their live picture as well as an officially legitimate certificate or evidence of ownership of the Aadhaar card. A licensed officer of the controlled entity/bank will note the latitude and longitude of the position from which the customer provides the live shot.
The RBI agreed to broaden the reach of the video KYC or V-CIP (video-based customer recognition process) to include new customer categories such as sole proprietorship companies, approved signatories, and beneficial owners of legal entities.
Last week, the country’s largest lender – SBI – announced that it would update KYC based on documentation obtained from customers via post or registered email, eliminating the need for them to visit the bank’s branch during the pandemic.