Amendments to Master Direction on KYC

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Jun 30, 2021

Amendments to Master Direction on KYC

The RBI, with effect from May 10, 2021, amended the Video based Customer Identification (‘V-CIP’) provisions in the Master Direction on KYC to further leverage, simplify and rationalise the process of periodic updation of KYC. The key amendments are as follows:

i. The amended definition of ‘KYC’ recognises the V-CIP process as an alternate method of consent-based customer identification with facial recognition and customer due diligence (‘CDD’) conducted by an authorised official of the Regulated Entities (‘RE’) through live interaction. The information received by the customer can be verified through independent verification and by maintaining an audit trail of the process.

ii. REs can undertake V-CIP to carry out, inter alia, CDD for new customer on-boarding for various customers, authorised signatories and beneficial owners, conversion of existing accounts opened in non-face to face mode, and updation of KYC for eligible customers.

iii. Certain prescribed infrastructural requirements are to be maintained by REs in respect of V-CIP.

iv. The RBI has specified a detailed procedure for V-CIP to ensure that the liveness of the interaction is ensured. REs are to formulate a clear work flow and standard operating system procedure for V-CIP and ensure adherence.

v. RBI has prescribed a risk-based approach for periodic updation of KYC from the date of opening of the account / last KYC updation. Periodic updation will be carried out: (a) at least once in every two years for high risk customers; (b) once in every eight years for medium risk customers; and (c) once in every 10 years for low risk customers.

REs are required to ensure that they have the KYC documents of the customer as per the current CDD standards. Further, REs are to provide acknowledgments to the customers mentioning the date of receipt of the relevant document(s), including self-declaration from the customer, for carrying out periodic updation. Any additional and exceptional measures adopted by REs are required to be specified in the RE’s internal KYC policy and are to be duly approved by its board of directors.

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