Lower-risk customers may get to breathe easy on KYC norms

The Centre is working on long-awaited changes to Know Your Customer (KYC) rules, simplifying the process for lower-risk customers and tightening checks on higher-risk accounts.

- Subhash Narayan & Rhik Kundu

The government is preparing to amend the Prevention of Money Laundering Act (PMLA) to bring about such a risk-based KYC framework, two people aware of the development said. Currently, financial institutions mandate a uniform KYC process for their customers regardless of risk.

"The changes would align both Reserve Bank of India regulations and broader PMLA compliance norms, streamlining the KYC onboarding process and improving overall customer experience," one of the two people cited above said on the condition of anonymity.

India's complex web of KYC regulations often leads to significant headaches for both financial institutions and individuals due to the need for repeated documentation and varying requirements across different entities.

The current system can be cumbersome and time-consuming, requiring multiple submissions of similar information to different agencies. The amendment to PMLA seeks to fix this.