What changed
Previously, SHGs faced difficulties complying with KYC norms for all members when opening savings accounts or availing credit. Now, only office bearers need KYC verification at account opening, and no separate KYC is needed at credit linkage if the account is already active.
What it means for you
Banks can now onboard SHGs faster with reduced documentation, lowering operational costs and improving financial inclusion. However, banks must update their KYC policies to reflect these relaxations and ensure strict adherence to the revised norms.
What you must do
- Update your bank's KYC policy to incorporate the simplified norms for SHGs as per this circular.
- Train branch staff to verify only office bearers' KYC at SHG savings account opening.
- Ensure no fresh KYC is demanded from SHGs at credit linkage if the account is already operational.
- Maintain records of office bearer KYC and monitor compliance with PMLA obligations.
Who it affects
Regional Rural Banks (RRBs), State and Central Co-operative Banks, Self Help Groups (SHGs) and their members, Bank branch staff handling SHG accounts
Do we need to verify KYC of all SHG members at account opening?
No, only KYC of the office bearers is required. Full member verification is not needed for opening the savings bank account.
Is fresh KYC required when an SHG seeks credit linkage?
No, if the SHG's savings account is already operational and KYC was done at opening, no separate KYC verification is needed for credit linkage.
What should banks do to implement this change?
Banks must revise their KYC policy to reflect these simplified norms and ensure strict adherence to the updated guidelines.