What changed
RBI now allows banks to rely on KYC verification performed by SEBI-regulated custodians or intermediaries for eligible FPIs (duly registered with SEBI and having undergone required KYC due diligence/verification through such entities) opening PIS accounts. Custodians must share verified KYC documents with banks upon FPI authorization. Banks remain ultimately responsible for customer due diligence and may need enhanced measures if required.
What it means for you
Banks can reduce redundant KYC checks for FPIs, cutting operational costs and turnaround time. However, they must ensure proper documentation transfer and maintain ultimate liability for due diligence. This aligns banking KYC with SEBI norms, streamlining FPI onboarding.
What you must do
- Accept KYC documents verified by SEBI-regulated custodians for eligible FPIs (duly registered with SEBI and having undergone required KYC due diligence/verification through such entities) under PIS, subject to conditions in Rule 9(2) of PMLA Rules.
- Obtain written authorization from FPIs for custodians to share KYC documents with your bank.
- Maintain a signed record of document transfer between custodian and bank.
- Obtain an undertaking from FPIs or a Global Custodian acting on behalf of the FPI to submit any exempted documents (as detailed in Annex II) when required.
- Share KYC documents with other banks or market intermediaries only upon FPI's written authorization.
Who it affects
Scheduled Commercial Banks (excluding RRBs), Local Area Banks, All India Financial Institutions, Foreign Portfolio Investors, SEBI-regulated custodians and intermediaries
Can we rely on KYC done by any third party for FPIs?
Only on KYC verification done by SEBI-regulated custodians or intermediaries for FPIs that are duly registered with SEBI and have undergone the required KYC due diligence/verification through such entities, subject to conditions in Rule 9(2) of PMLA Rules. You remain ultimately responsible for due diligence.
What documents do we need from the custodian?
Hard copies of KYC documents furnished by the FPIs to the custodian/intermediary, verified with originals or notarized copies where applicable, certified by the custodian. Maintain a signed transfer record.
Does this apply to existing FPI clients?
Yes, the circular applies to both new and existing FPI clients, but only for accounts under the Portfolio Investment Scheme.