RBI Eases KYC Norms: Extended Deadline And Simplified Update Process For Low-Risk Customers

RBI Revamps KYC Rules Amid Backlog Concerns

The Reserve Bank of India (RBI) has announced a significant overhaul of its Know Your Customer (KYC) guidelines to streamline the update process and reduce the mounting backlog in periodic verifications, particularly for accounts linked to government welfare schemes such as Direct Benefit Transfers (DBT) and the Pradhan Mantri Jan-Dhan Yojana (PMJDY).

Simplified KYC Update Process with Business Correspondents

In a bid to improve the accessibility aspect, the RBI has allowed banks to engage Business Correspondents (BCs) to help customers in the process of KYC update. Banks can also take self-declaration for such accounts where the information has not changed except for a change of address.  These updates can be collected either through biometric e-KYC or via physical documentation, which will later be submitted to the bank for verification.

Although BCs can facilitate the process, the final responsibility for ensuring the update’s completion remains with the bank. This development is especially crucial for customers in remote and underbanked areas, who can now update their KYC at nearby retail outlets.

Extended Deadline for Low-Risk Customers

Low-risk individual customers now have an extended grace period to complete their KYC updates. They can continue transacting without service disruptions until June 30, 2026, or up to one year from their original due date, whichever is later. In the meantime, their accounts will be subject to regular monitoring by regulated entities to ensure ongoing compliance.

Low-risk customers generally include individuals with stable income and low account turnover, such as salaried employees and those from economically weaker sections.

Mandatory Reminders and Outreach Initiatives

To promote timely compliance, the RBI has mandated that banks and regulated entities send a minimum of three reminders to customers — both before and after the due date. At least one reminder must be issued via physical letter, while others can be delivered through SMS or email. Each communication must include clear update instructions, escalation procedures, and potential consequences for non-compliance. These actions must be logged in the bank’s records to maintain a proper audit trail. All regulated entities must implement this system by January 1, 2026.

Additionally, the RBI has encouraged banks to organise special KYC camps and conduct targeted drives, especially in rural and semi-urban areas, to address the backlog and enhance outreach.

This regulatory update marks a pivotal step in making financial access more inclusive, ensuring smoother operations for low-risk customers, and easing the operational burden on banks. With digitised and decentralised KYC facilitation, the RBI aims to balance compliance with convenience.

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