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KYC Norms for SHGs: CDD at Credit Linking

No longer current — withdrawn, no replacement on file yet
Source: Reserve Bank of India · RBI/2021-22/10 · issued 01 Apr 2021 · ~1 min read
Quick answerRBI now requires banks to perform Customer Due Diligence (CDD) for all SHG members at the time of credit linking, replacing earlier simplified norms. This tightens KYC for SHGs effective from April 1, 2021.

What changed

RBI amended clause (c) of Section 43 of the Master Direction on KYC (Feb 25, 2016) to mandate that CDD for all SHG members must be done at credit linking. Previously, simplified norms allowed flexibility; now the timing is fixed.

What it means for you

Banks must now complete full KYC verification for every SHG member before disbursing credit, increasing operational workload but strengthening AML compliance. This may delay SHG loan processing if member documentation is incomplete.

Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.

What banks were required to do at the time

Who it affects

All scheduled commercial banks, Regional rural banks, Small finance banks, SHG lending teams and branch managers

❓ Common questions

Regulatory timeline

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

Does this apply to existing SHGs already linked to credit?

The amendment is effective immediately from April 1, 2021, but the source does not specify retroactive application. Banks should apply it to new credit linkages and may need to review existing ones for compliance.

What happens if CDD is not completed at credit linking?

The directive does not specify penalties, but non-compliance with KYC norms can lead to regulatory action. Banks should ensure CDD is done before disbursing any credit to SHGs.

📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
Repealed by RBI/2025-26/100 — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
RBI’s words: “Official withdrawal register entry #319: DOR.AML.BC.No.1/14.01.001/2021-22 — "Amendment to Master Direction (MD) on KYC - KYC Norms for Self Help Groups (SHGs)" dated April 1, 2021”
📜 Read the original circular — full text as issued by RBI
RBI/2021-22/10 DOR.AML.BC.No.1/14.01.001/2021-22 April 1, 2021 The Chairpersons/ CEOs of all the banks Madam/Sir, Amendment to Master Direction (MD) on KYC – KYC norms for Self Help Groups (SHGs) Please refer to Section 43 of the Master Direction on KYC dated February 25, 2016 as amended from time to time, wherein simplified norms for Self Help Groups (SHGs) have been stipulated. 2. In this regard, on a review, it has been decided to amend clause (c) of Section 43 to read as under: “Customer Due Diligence (CDD) of all the members of SHG may be undertaken at the time of credit linking of SHGs.” 3. The Master Direction on KYC dated February 25, 2016 , is hereby updated to reflect the changes effected by the above amendment and shall come into force with immediate effect. Yours faithfully, (Thomas Mathew) Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2021-22/10 · issued 01 Apr 2021. The plain-English explanation above is BankPulse’s own independent summary.
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Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12060&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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