The Securities and Exchange Board of India (Sebi) has put forward a plan to overhaul know-your-customer (KYC) norms. This move aims to simplify client onboarding processes. It also seeks to revise the existing risk management framework for KYC registration agencies (KRAs). The proposals align practices with current technological advancements.
Key Changes to Ease Investor Burden
In a consultation paper released on Friday, the capital markets regulator recommended significant changes. Intermediaries should update client KYC records based on information received from KRAs. This would eliminate the need for repeated checks each time a client interacts with a new intermediary.
To ensure records stay current, KRAs would send advance alerts to intermediaries. These alerts would trigger in specific situations. They include when a client’s KYC has not been updated for five years. They also cover cases where an officially valid document has expired. Alerts will also go out when a minor client turns eighteen. Intermediaries must then act on these alerts and update the records promptly.
"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."
Greater Flexibility in Contact Details
Another key proposal focuses on providing greater flexibility in contact details. Currently, clients can submit only one telephone number. This can be a residence, office, or mobile number. They can also provide only one email ID in the central KYC system.
Sebi has suggested allowing clients to submit alternative mobile numbers and email IDs. These would also undergo verification. KRAs would store them securely. Where a mobile number is already linked to Aadhaar and tagged as verified by the KRA, intermediaries accessing the data can optionally verify it. This step aims to reduce operational friction during onboarding.
Addressing Gaps in Record Handling
The consultation paper also tackles gaps in how KYC records are managed when client relationships end. The regulator has proposed introducing a formal process to delink KYC records. This requires intermediaries to notify KRAs within three working days of account closure. KRAs must then update or delink the records within two working days.
This measure aims to prevent the continued sharing of client information with intermediaries who no longer maintain a relationship with the client. At present, no explicit requirement exists for intermediaries to inform KRAs when an account closes.
Relaxed Norms for OCI Cardholders
For overseas citizen of India (OCI) cardholders residing in India, Sebi has proposed relaxing documentation norms. 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. Verification of their Indian address would suffice.
This change is expected to simplify onboarding for a segment that often faces practical hurdles despite long-term residence in India.
Easing Name Changes and Address Verification
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 need 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." This applies even if the current address has not been independently verified. It addresses 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.
