What changed
RBI released a comprehensive, updated KYC direction specifically for Urban Co-operative Banks, replacing previous versions. The new directions consolidate all prior KYC-related instructions into a single document, covering customer acceptance policy, risk management, customer identification, due diligence (including enhanced and simplified), record management, and reporting to FIU-India. The directions are effective from the date of issue, November 28, 2025, and are updated as of December 29, 2025.
What it means for you
Urban Co-operative Banks must now operate under a unified KYC framework, which may require updating internal policies, systems, and training to ensure full compliance. The directions emphasize alignment with PMLA and FATF standards, meaning banks need to strengthen their AML/CFT controls, especially around beneficial ownership identification and ongoing due diligence. Non-compliance could lead to regulatory action, so banks should prioritize reviewing and implementing these directions.
What you must do
- Review the full text of the RBI (Urban Co-operative Banks – Know Your Customer) Directions, 2025 and map all requirements against your current KYC/AML policies.
- Update your board-approved KYC policy to incorporate the new customer acceptance, risk management, and due diligence procedures as specified.
- Train all relevant staff on the updated customer identification, enhanced due diligence, and simplified due diligence procedures.
- Ensure your reporting mechanism to FIU-India is aligned with the new directions and that record management practices meet the prescribed timelines.
- Conduct a gap analysis to identify any areas needing system or process changes, especially for beneficial owner identification and ongoing monitoring.
Who it affects
Urban Co-operative Banks (Primary Co-operative Banks), Board of Directors and senior management of UCBs, Compliance and AML/KYC teams of UCBs, Branch staff handling customer onboarding and transactions
When do these new KYC directions take effect?
The directions are effective from the date of issue, November 28, 2025, and have been updated as of December 29, 2025.
Do these directions replace all previous KYC circulars for UCBs?
Yes, this is a consolidated direction that replaces earlier versions of KYC instructions for Urban Co-operative Banks, as indicated by the 'Previous Versions' reference.
What is the legal basis for these directions?
RBI issued these under sections 35A of the Banking Regulation Act, 1949, the Banking Regulation Act (AACS), 1949, section 56 of the Act, section 10(2) read with section 18 of the Payment and Settlement Systems Act, 2007, section 11(1) of FEMA, 1999, and Rule 9(14) of the PML (Maintenance of Records) Rules, 2005.