RBI’s new KYC rules to ease compliance

MUMBAI: The RBI has proposed changes to its master direction on ‘know your customer’ norms-rules aimed at preventing money laundering-that will ease compliance for millions of bank customers, particularly low-risk individuals and beneficiaries of govt schemes. The draft circular outlines relaxed procedures for periodic KYC updates, responding to concerns over delays and customer complaints.The proposed rules mark a shift from rigid timelines towards a more flexible system while maintaining safeguards against money laundering and terrorist financing. For low-risk customers, the RBI extended the KYC update deadline to one year from the due date or until June 30, 2026, whichever is later. During this period, transactions will continue, though the accounts will remain under regular monitoring. This move brings relief as earlier banks froze accounts that did not comply with re-KYC requirements. To address large backlogs and improve customer service, the RBI directed banks to improve communication. Before the due date, regulated entities must send at least three alerts, including one by letter.After the due date, another three reminders are required, again with at least one letter.