RBI eases KYC norms for NBFCs

KYC means “Know Your Customer”.

The Reserve Bank of India has Amended rules for non-banking financial companies (NBFCs) with regard to their Know-Your-Customer (KYC) exercise.

It has relaxed the time limit during which such due diligence is required.

  • Why? The rules have been eased due to practical difficulties and constraints in getting KYC documents at frequent intervals.

Norms include:

  • Full KYC exercise will be required to be done
    1. at least every 2 years for high risk individuals and entities,
    2. at least every 8 years for medium risk individuals and entities,
    3. at least every 10 years for low risk and
      taking into account whether and when client due diligence measures have previously been undertaken and the adequacy of data obtained.
  • However, physical presence of clients may not be insisted at such periodic updations.
  • It is a process by which banks obtain information about the identity and address of the customers.
  • This process helps to ensure that banks’ services are not misused.
  • The KYC procedure is to be completed by the banks while opening accounts and also periodically update the same.

Sources: The Hindu, RBI.

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