What changed
RBI harmonized KYC norms for FPIs with SEBI's risk-based categorization, allowing UCBs to accept KYC verification from SEBI-regulated custodians/intermediaries. Banks must obtain certified copies of KYC documents and maintain transfer records. The simplified process applies to both new and existing FPI clients for PIS accounts.
What it means for you
UCBs can now open FPI accounts faster by relying on third-party KYC, reducing duplication of documentation. However, banks remain ultimately responsible for customer due diligence and may need enhanced measures if required. This aligns UCBs with broader market practices, potentially boosting FPI participation in cooperative banks.
What you must do
- Accept KYC documents certified by SEBI-regulated custodians/intermediaries for FPIs under PIS.
- Maintain proper records of document transfer with signatures from both transferor and transferee officials.
- Obtain an undertaking from FPIs or their global custodian to submit exempted documents when required.
- Ensure ultimate responsibility for customer due diligence and apply enhanced measures if needed.
- Share KYC documents with other banks or regulated intermediaries only upon written FPI authorization.
Who it affects
AD Category I Primary Urban Co-operative Banks, Foreign Portfolio Investors (FPIs), SEBI-regulated custodians and intermediaries
Can we rely on KYC done by any third party for FPIs?
Yes, but only if the third party is a SEBI-regulated custodian or intermediary, and the conditions under Rule 9(2) of the PMLA Rules are met. You must obtain certified copies and maintain transfer records.
Does this circular apply to existing FPI clients?
Yes, the provisions apply to both new and existing FPI clients, but only for accounts under the Portfolio Investment Scheme.
What if an FPI does not provide all KYC documents upfront?
You must obtain an undertaking from the FPI or its global custodian that exempted documents will be submitted when required. You remain responsible for due diligence.