What changed
RBI now allows banks to accept KYC verification performed by SEBI-regulated custodians or intermediaries for FPIs opening PIS accounts, instead of requiring fresh KYC. Banks must obtain certified copies of documents from the custodian, maintain transfer records, and get an undertaking from the FPI for any exempted documents. The circular applies to both new and existing FPI clients.
What it means for you
Banks can streamline account opening for FPIs by leveraging third-party KYC, reducing operational burden and turnaround time. However, banks remain ultimately liable for customer due diligence and must take enhanced measures if needed. This harmonizes KYC norms across regulators and aligns with SEBI's risk-based categorization of FPIs.
What you must do
- Accept KYC documents from SEBI-regulated custodians/intermediaries for FPIs, provided they certify verification with originals.
- Maintain a signed record of document transfer between custodian and bank.
- Obtain a written undertaking from the FPI or global custodian to submit exempted documents when required.
- Share KYC documents with other banks or regulated intermediaries only upon written authorization from the FPI.
- Ensure enhanced due diligence for higher-risk FPIs as per your bank's risk assessment.
Who it affects
AD Category I State Cooperative Banks (StCBs), All banks dealing with Foreign Portfolio Investors, Custodians and SEBI-regulated intermediaries, FPIs investing under the Portfolio Investment Scheme
Can we rely entirely on the custodian's KYC for FPIs?
Yes, but only if the custodian is SEBI-regulated and certifies that documents have been verified with originals. You must also keep a signed transfer record and remain ultimately responsible for due diligence.
Does this circular apply to existing FPI accounts?
Yes, the provisions apply to both new and existing FPI clients under the Portfolio Investment Scheme.
What if the FPI wants to use the account for non-PIS activities?
The simplified KYC procedure is only for PIS accounts. For other approved activities, separate KYC requirements may apply as per existing RBI guidelines.