No freezing of bank account for KYC, Digital proof can be final for KYC
RBI on 5th May 2021 has relaxed KYC (know-your-customer) norms keeping in view of the current COVID-19 situation to enable the process to be completed remotely and prevent banks from freezing accounts in which such data has not been updated.
As per RBI circular, Customer whose accounts have not gone through periodic updation of KYC 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. Earlier, SBI had given similar instructions to its branches after a directive from the finance minister through a tweet.
This direction of the central bank gives relief to customers of all RBI-regulated entities; one larger reform is the enabling of digital KYC. Currently, banks are fulfilling the KYC facility for individuals remotely using video-based customer identification (V-CIP). This process has been extended for businesses including proprietorship firms, authorised signatories and beneficial owners of legal entities.
Earlier, accounts opened using Aadhaar-based e-KYC (non-face-to-face) were treated as ‘limited KYC’ accounts. Due to the RBI circular these accounts will now be treated as fully compliant accounts. Entities looking to complete the KYC process can now use KYC Identifier of Centralised KYC Registry (CKYCR) for V-CIP and submission of electronic documents (including documents issued through Digi Locker) as identify proof.
Paytm founder Vijay Shekhar Sharma stated that The RBI allowing video KYC & other digital methods to complete many requirements for renewal and new KYC will ease access to formal banking and digital payments. It is timely and will have long-term positive impact.
Besides opening savings accounts, digital KYC will also make lending easier. According to Len Den Club CEO and co-founder of Bhavin Patel, the CKYCR push will make it easy for lenders to verify customers at the lending point and further strengthen the ecosystem. He also added that Major banks are already part of central-KYC registry and now fintech companies like Len Den Club have already registered to ensure better digital and hassle-free experience for customers in need.
Extract of RBI Circular
DOR. AML.REC 13/14.01.001/2021-22
May 5, 2021
The Chairpersons/ CEOs of all the Regulated Entities
Periodic Updation of KYC –
Restrictions on Account Operations for Non-compliance
Please refer to Section 38 of the Master Direction on KYC dated February 25, 2016, in terms of which Regulated Entities (REs) have to carry out periodic updation of KYC of existing customers. Keeping in view the current COVID-19 related restrictions in various parts of the country, REs 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.
Regulated entities are also advised to continue engaging with their customers for having their KYC updated in such cases.
Chief General Manager