What changed
RBI reiterates that the indicative list of KYC documents in Annex-II of the 2004 circular is not exhaustive; banks treating it as such are denying services. It clarifies that permanent address can be verified via a relative's utility bill and declaration. Risk categorization review must occur at least every six months, and customer identification data must be updated every five years for low-risk and every two years for high/medium-risk customers.
What it means for you
Banks must relax rigid KYC practices to include alternative address proofs for dependents living with relatives, reducing customer friction. The six-monthly risk review and periodic data updation impose operational discipline, ensuring compliance with AML/CFT standards. Non-compliance could lead to regulatory scrutiny or penalties for denying banking access.
What you must do
- Review internal KYC instructions to ensure the indicative document list is not treated as exhaustive.
- Accept utility bills of relatives along with a declaration for address verification of dependents.
- Implement a system for risk categorization review of accounts at least once every six months.
- Set up periodic updation of customer identification data: every 5 years for low-risk, every 2 years for high/medium-risk customers.
- Train staff on suspicious transaction reporting related to terrorism financing under PMLA rules.
Who it affects
Primary (Urban) Co-operative Banks (UCBs), Compliance and KYC teams at UCBs, Branch managers and customer-facing staff, Low-risk customers, especially dependents living with relatives
Can a wife open an account if utility bills are in her husband's name?
Yes, banks can accept the husband's utility bill and a declaration from him confirming the wife is a relative and staying with him. This avoids denying services to dependents.
How often must we update customer KYC data?
For low-risk customers, update at least once every five years. For high and medium-risk customers, update at least once every two years. Risk categorization itself must be reviewed every six months.
What if a bank treats the indicative document list as exhaustive?
RBI warns this denies banking services to the public. Banks must review internal instructions to ensure flexibility, especially for low-risk customers, to avoid regulatory action.