New draft guidelines to ease KYC update: RBI invites public comments, check last date here

To simplify the Know Your Customer (KYC) update process for millions of banking customers, the Reserve Bank of India (RBI) has released a draft circular inviting public comments on the proposed changes.

Public and stakeholders have time till June 6 to send in their comments on the draft amendment titled ‘Updation/ Periodic Updation of KYC– Revised Instructions’.

The RBI said it has noted a large backlog in periodic KYC updates, particularly in bank accounts opened for Direct Benefit Transfers (DBT) and Electronic Benefit Transfers (EBT) under government schemes, and Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts. The RBI also acknowledged that it has been receiving complaints from customers about difficulties faced during the KYC updation.

Kunal Varma, founder and CEO, Freo, termed the proposed changes “a timely and progressive step”. “By enabling digital modes for periodic KYC updates and introducing more clarity around timelines and responsibilities, the framework simplifies compliance without compromising on security. For digital-first financial institutions, this move supports operational efficiency and enhances the onboarding and servicing experience for customers. It reflects the regulator’s continued push to align innovation with responsible growth."

To address these challenges and enhance customer convenience, the RBI has proposed several key changes:

Business Correspondents (BCs) will now be allowed to facilitate KYC and its periodic updation under the new directions.

Banks will be advised to hold KYC camps and run intensive awareness campaigns, particularly targeting rural and semi-urban branches, and branches with high pendency in KYC updates.

Banks will be encouraged to take an empathetic view while reactivating dormant accounts, in line with instructions issued in the RBI’s earlier circular dated December 2, 2024.

The amendments, proposed under the RBI KYC (Amendment) Directions, 2025, are aimed at making the KYC process more inclusive, accessible, and less burdensome, especially for financially vulnerable sections of the population.

Vijay Khubchandani, Founder and CEO, Seven, said, "From a fintech perspective, the proposal to allow self-service digital portals for KYC updation with certain caveats improves scalability, speed of customer servicing, and cost efficiency. It also provides better regulatory shift in line with the rapid evolution of tech platforms. For Fintechs, especially those catering to rural and peri-urban areas, these draft guidelines ease the compliance constraints while maintaining robust risk frameworks."

"The RBI has shown they are willing to evolve with consultative approaches and move with the pace of changing technology. As an industry, we appreciate this level of detail and balance, which helps foster a more inclusive, secure, and customer-centric financial system. Fostering these changes will be achieved in collaboration with relevant stakeholders to execute these strategies successfully," Khubchandani added.