RBI Simplifies KYC: Boosting Financial Inclusion with Flexible Onboarding Options

The Reserve Bank of India (RBI) has unveiled significant amendments to its Know Your Customer (KYC) regulations, making customer onboarding quicker, more flexible, and widely accessible. These changes, introduced through the RBI (KYC) (Amendment) Directions, 2025, aim to enhance inclusive banking, particularly benefiting first-time users and beneficiaries of government schemes.

The updated norms streamline the process by allowing Aadhaar-based e-KYC, video KYC (V-CIP), and the use of DigiLocker documents. This move is set to simplify account opening and KYC updates across both digital and physical channels.

Three Key Onboarding Modes:

1.     Face-to-Face Onboarding:

o   Customers can now open accounts using Aadhaar biometric-based e-KYC.

o   If a customer's current address differs from their Aadhaar address, a simple self-declaration is now sufficient.

o   Digital KYC is also permitted in in-person settings, further streamlining the process.

2.     Non-Face-to-Face (NFTF) Onboarding:

o   Remote account opening is now possible using Aadhaar OTP-based e-KYC, subject to specific conditions.

o   Banks can accept DigiLocker documents, other e-documents, and certified paper copies for verification.

o   Accounts opened via NFTF must complete full Customer Due Diligence (CDD) within one year.

3.     Video-based Customer Identification Process (V-CIP):

o   V-CIP facilitates identity verification through a live, secure, and consent-based video interaction with a bank official.

o   This method is now considered equivalent to face-to-face onboarding, making it valid for both new account openings and KYC updates.

Additional Measures for Streamlined Onboarding:

·       Central KYC Registry (CKYCR) Integration: Banks are now mandated to utilize the CKYCR to fetch a customer’s existing KYC record with their consent. This eliminates the need for repeated document submissions, simplifying processes for both customers and banks.

·       Expanded Reach via Business Correspondents (BCs): BCs are now authorized to assist in customer onboarding and KYC updates. This is expected to significantly increase banking access in rural and remote areas.

·       Empathetic Account Reactivation: The RBI has advised banks to adopt a lenient approach when reactivating accounts opened under various welfare schemes, ensuring beneficiaries can continue to access financial services without undue hurdles.

Furthermore, the RBI has urged banks to conduct special onboarding and KYC update camps. They are also encouraged to run targeted awareness campaigns in rural and semi-urban areas, aiming to bring more individuals into the formal banking system and foster greater financial inclusion.