The Securities and Exchange Board of India (Sebi) is proposing to revamp know-your-customer (KYC) norms to ease client onboarding, revise the existing risk management framework for KYC registration agencies (KRAs), and align practices with current technological advancements.
In a consultation paper released on Friday, the capital markets regulator recommended that intermediaries update client KYC records based on information received from KRAs, instead of repeating checks each time a client interacts with a new intermediary.
To keep records updated, KRAs would send advance alerts to intermediaries when a client’s KYC has not been updated for five years, when an officially valid document has expired, or when a minor client turns 18. Intermediaries would then act on these alerts and update the records.
“Investors would no longer have to give multiple documents when they approach different intermediaries,” said Akshaya Bhansali, managing partner at law firm Mindspright Legal. “KYC will become more transparent, disciplined, and organized if the proposal comes to action.”
Other key proposals
Another key proposal focuses on greater flexibility in contact details. Currently, clients can provide only one telephone number—residence, office, or mobile—and one email ID in the central KYC system. Sebi has suggested allowing clients to submit alternative mobile numbers and email IDs, which would also be verified and stored with the KRA.
Where a mobile number is already linked to Aadhaar and tagged as verified by the KRA, intermediaries accessing the data can optionally verify it, easing operational friction during onboarding.
The consultation paper also addresses gaps in how KYC records are handled when client relationships end. The regulator has proposed introducing a formal process to delink KYC records, requiring intermediaries to notify KRAs within three working days of account closure and KRAs to update or delink the records within two working days.
This is aimed at preventing the continued sharing of client information with intermediaries who no longer have a relationship with the client. At present, there is no explicit requirement for intermediaries to inform KRAs when an account is closed.
For overseas citizen of India (OCI) cardholders residing in India, Sebi has proposed relaxing documentation norms. While overseas address proof is currently mandatory, the regulator has suggested making it optional for OCI cardholders who can demonstrate residence in India for more than 182 days, along with verification of their Indian address.
This is expected to simplify onboarding for a segment that often faces practical hurdles despite long-term residence in India.
The paper also proposes easing requirements for name changes and address verification. Clients who have already updated their names in PAN and Aadhaar databases would no longer be required to submit additional documents.
Similarly, if a client’s primary address has already been source-verified, KRAs would be allowed to tag the KYC as “validated” even if the current address has not been independently verified, addressing practical limitations in source validation.
“We will soon be moving to a system where banks will be able to access client information through the same KRA portal,” Bhansali added.
