RBI Eases KYC Rules: More Time, Less Hassle for Low-Risk Account Holders: Details

The Reserve Bank of India (RBI) has made several updates to its KYC processes on June 12, 2025, while amending its instructions on Know Your Customer (KYC) and mandating advance notice for KYC reminders, among several other changes. (rewrite)

What Did RBI Say?

The central bank has said that it has observed a significant backlog in periodic KYC updates, including in the accounts that have been opened for receiving Direct Benefit Transfers (DBT) or Electronic Benefit Transfers (EBT) for different government schemes along with the accounts opened under the Pradhan Mantri Jan-Dhan Yojana (PMJDY).

Why Is KYC Important?

“The RBI’s updated KYC guidelines are a much-needed step toward deepening financial and insurance inclusion. As per industry estimates, nearly 40–45% of rural customers still face gaps in KYC compliance due to limited access to formal banking infrastructure or lack of awareness,” said Rakesh Kumar, Founder & MD of Square Insurance.

“Enabling KYC updates through Business Correspondents and digital tools like Video-KYC removes a major barrier for policyholders who may otherwise lose coverage due to technical non-compliance. Structured reminders and extended grace periods will reduce policy lapses, enhance trust, and most importantly, ensure uninterrupted protection for millions of vulnerable individuals. We also see this paving the way for improved claims servicing and faster policy issuance. If implemented effectively, this could significantly improve rural policy penetration, which still lingers at under 25% in some states,while aligning regulatory compliance with ground-level realities,” he added.

Simplification Of The Update Process

RBI has permitted banks to use the services of authorised BCs to collect self-declarations from customers with unchanged KYC details or only address changes.

BCs can also electronically collect said data through biometric e-KYC or receive physical forms temporarily.

The BC will then authenticate and submit them to the bank, which then updates the customer's KYC details and notifies them upon completion. However, the bank has the final responsibility of ensuring the successful completion of the KYC update.

KYC Deadline Extended For Low-Risk Customers

The KYC deadline has also been extended for low-risk customers and they can now continue transactions without interruptions, even if their KYC update is pending.

They also have the flexibility to update their KYC details by June 30, 2026, or within a year of the original due date, which ever one of these is later.

In the mean time, their accounts will be regularly monitored by regulated entities (REs) who will ensure security as well as compliance.

Low-risk customers are typically individuals like salaried employees with well-defined salary structures and those from lower economic strata with small incomes, balances and low account turnovers.

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