RBI has asked banks and non-banking financial companies to adopt a risk-based approach regarding KYC (Know Your Customer) updates from time to time.
The Central Reserve Bank has issued new guidelines for Know Your Customer (KYC) from banks. The Reserve Bank of India on Tuesday took an initiative to further strengthen the customer verification system. Under this, banks and non-banking financial companies have been asked to adopt a risk-based approach regarding KYC (Know Your Customer) updates from time to time.
RBI made changes in master direction
After review, the Central Bank has amended the ‘Master’ guidelines regarding KYC. Under this, banks, non-banking financial companies (NBFCs) and other entities under the purview of RBI will have to conduct due diligence of their customers as per the prescribed procedures.
Why did this change happen?
This amendment of RBI comes after the government’s new instructions related to Anti-Money Laundering Rules, Unlawful Activities (Prevention) Act (UAPA) and Weapons of Mass Destruction and their Delivery Systems (Prohibition of Unlawful Activities) Act.
Guidelines came on the recommendations of FATF
The Reserve Bank said that it has also updated some instructions as per the recommendations of FATF (Financial Action Task Force). The latest master instructions state that the risk-based approach for periodic updates of KYC has been changed.
Under this, entities coming under the regulation of the Central Bank will have to adopt a risk-based approach for periodic updates of KYC. To ensure that information collected as part of customer investigations is retained, especially where the risk is high.
