What changed
RBI has temporarily suspended the enforcement of account operation restrictions for customers whose periodic KYC updation is due and pending as of the date of this circular. This relief is valid until December 31, 2021, and applies only to KYC-related non-compliance, not to directions from other regulators or courts.
What it means for you
Banks and other regulated entities cannot freeze, debit-freeze, or otherwise restrict transactions on accounts solely because the customer hasn't updated KYC during this period. However, this does not absolve banks from their obligation to pursue KYC updates; they must continue outreach. The relaxation is a COVID-19 response to avoid customer inconvenience.
What you must do
- Immediately lift any restrictions imposed on accounts solely due to pending periodic KYC updation, effective from the date of this circular.
- Ensure no new restrictions are placed on such accounts for KYC non-compliance until December 31, 2021.
- Continue proactive customer engagement through SMS, email, or branch visits to complete KYC updation.
- Maintain records of accounts where KYC is pending and track updation progress for post-December 2021 compliance.
Who it affects
All scheduled commercial banks, Small finance banks, Payment banks, Non-banking financial companies (NBFCs), Cooperative banks, All other regulated entities under RBI's KYC Master Direction
Does this circular apply to accounts where KYC was due before May 5, 2021?
Yes, the relief covers all accounts where periodic KYC updation is due and pending as on the date of the circular (May 5, 2021). No restrictions can be imposed for this reason alone until December 31, 2021.
Can we still restrict accounts if a regulator or court orders it?
Yes, the circular explicitly states that restrictions may be imposed if warranted by instructions from any regulator, enforcement agency, or court of law. This relief is only for KYC non-compliance by the customer.
What should we do if a customer refuses to update KYC even after December 31, 2021?
After December 31, 2021, banks may resume normal KYC compliance actions as per the Master Direction on KYC, including placing restrictions on account operations. Continue engaging customers to complete updation before the deadline.