Last week, the RBI released a draft circular on how regulated entities (REs) should go about updating customer KYC (Know Your Customer). The deadline to submit comments is 6 June 2025.

Quick context

KYC isn’t a one-time thing. REs do KYC when onboarding a customer. After that, they’re expected to refresh it periodically – every 10 years for low-risk, 8 years for medium-risk, and 2 years for high-risk customers. Plus, re-KYC is triggered when certain events happen (like a customer turning 18).

If a customer doesn’t respond to a re-KYC request, their account is suspended. This has become a serious pain point for customers – especially those receiving government subsidies or using Jan Dhan accounts. Complaints have been piling up. The recent draft circular aims to address this issue.

What’s changing?

Here are some key changes proposed:

• Re-KYC for low-risk customers

Current Rule: No special exception; KYC must be updated every 10 years.

Proposed Amendment: Transactions are allowed even if KYC is overdue, provided it is updated within one year of the due date or by June 30, 2026 (whichever is later). Accounts must still be monitored.

• Use of Business Correspondents (BCs) for KYC updation

Current Rule: Not allowed explicitly.

Proposed Amendment: BCs can facilitate KYC updates when there is no change or only an address change, including the biometric e-KYC, documents, and self-declaration. BCs may use electronic or physical modes.

• Notices of re-KYC being due

Current Rule: REs should inform customers, but no explicit instructions on how or when.

Proposed Amendment: At least three advance intimations (at least one by letter) before the due date, and three reminders (at least one by letter) after the due date are mandatory. Communication must include a simply explained process for re-KYC and the consequences of inaction.

• Using CKYCR

Current Rule: CKYCR is prescribed as a KYC mode or a way to retrieve KYC documents; however no explicit mention that CKYCR must be the first step.

Proposed Amendment: CKYCR identifier-based KYC should be the mandatory first step when onboarding a customer. No need to ask for documents already available on CKYCR.

What does this mean for financial services companies?

This could ease friction in KYC updation, especially for low-risk and underserved users. It also nudges REs to lean on CKYCR and reduce duplication of efforts.

Curious about what this means for your fintech play? Let’s talk.

Author Credits: Fintech Team - Aparajita, Astha, Shayeri, Samyukta

aparajita@ikigailaw.com, astha@ikigailaw.com, product@ikigailaw.com