Low-Risk Accounts Safe from Freeze as RBI Extends KYC Deadline

The Reserve Bank of India (RBI) has eased KYC (Know Your Customer) norms on Thursday, directing banks and NBFCs to allow all transactions from so-called low-risk customers, even if their KYC is pending. The apex bank said that these customers can update their KYC by June 30, 2026 but transactions on their accounts will not be halted.

The RBI said it has noted a significant backlog in periodic KYC updates, including in accounts opened for receiving Direct Benefit Transfers (DBT) or Electronic Benefit Transfers (EBT) for various government schemes, as well as accounts opened under the Pradhan Mantri Jan-Dhan Yojana (PMJDY).

Banks and NBFCs are required to issue at least three advance notices—one of which must be in the form of a letter—at appropriate intervals through available communication channels, reminding customers to complete periodic KYC updates. If customers fail to comply by the due date, institutions must send at least three follow-up reminders, including one by letter, at suitable intervals. The deadline for issuing these reminders has been set for January 1, 2026.

The central bank has also permitted customers to provide self-declaration through banking correspondents (BCs) if there is no change in their KYC information, or if the only change is in address details. Banks may obtain the self-declaration, along with supporting documents, either in electronic form via BCs using biometric-based e-KYC authentication or through a physical form. It has allowed BCs to facilitate the process and mandated advance notice for KYC reminders.

The banking correspondent (BC) may forward the self-declaration to the concerned bank branch, providing an acknowledgement to the customer. However, the bank will remain responsible for completing the final KYC process and updating the records accordingly.

Additionally, banks have been permitted to update KYC for the activation of inoperative accounts and unclaimed deposits across all branches. The Reserve Bank of India (RBI) has also allowed the use of video-based customer identification for such updates. BCs may assist in the activation process of inoperative accounts as well, the RBI stated.