RBI Issues Draft Business Correspondents to Handle KYC Updates

Press Release: 2025-2026/402, Dated: 23.05.2025

1. Regulatory Context

The RBI’s Master Direction – Know Your Customer (KYC), 2016 lays down the obligation for banks to keep customer KYC records current (paragraph 38 – “Periodic Updation”). In practice, this periodic update has proved cumbersome—especially for rural and low-income customers who must travel to a branch and produce fresh identity/address documents.

2. Why a Draft Amendment Now?

• High pendency – Large numbers of accounts remain overdue for KYC updates, leading to “inoperative” status or restricted services.
• Financial-inclusion focus – The RBI wants to ensure that customers in rural and semi-urban areas can complete KYC without costly branch visits.
• Technology & outreach gap – Although Video-Customer Identification (V-CIP) is available, many customers lack the connectivity or know-how to use it effectively.

3. Timeline & Feedback

Stakeholders (banks, FinTech firms, BC networks, consumer groups) have until 6 June 2025 to submit comments on the draft. The RBI is expected to publish the final amendments soon after evaluating the feedback.

4. Operational Impact on Banks

• BC Enablement

1. 1. Update BC agreements and software to capture and transmit KYC data securely.
   2. Train BCs on document verification, Aadhaar-based e-KYC, and data-privacy protocols.

• Outreach Logistics

1. 1. Schedule village-level “KYC camps”; deploy mobile vans or temporary kiosks.
   2. Use SMS/IVR blasts to notify customers of camp dates and required documents.

• System Changes & Monitoring

1. 1. Modify CBS/CRM workflows to tag BC-initiated updates and autopopulate paragraph 38 compliance reports.
   2. Track branch-wise pendency; escalate branches falling into the “high pendency” bucket identified by RBI.

• Customer Communication

1. 1. Send due-date reminders, emphasising zero-fee updates at any branch, through BCs, or via V-CIP.

5. Benefits for Customers

• Proximity – Nearest BC outlet doubles as a one-stop KYC point—no need to travel far or queue at branches.
• Extended Time – A long window (to June 2026) to regularise overdue KYC without fear of account freeze.
• Multiple Channels – Choice among BC visit, branch walk-in, community camp, or video KYC.

6. Conclusion

The draft amendment reshapes paragraph 38 by turning Business Correspondents into frontline KYC facilitators and obligating banks to bring the service to the customer—rather than the other way around. Once finalised, these measures should slash pendency, reactivate dormant accounts, and advance India’s financial-inclusion agenda without diluting AML/CFT safeguards.

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