In view of the second wave of COVID-19, the Reserve Bank of India (RBI) has advised banks and other regulated financial institutions not to impose any restriction on customers until December 2021 due to the failure of the KYC update. Also, the Reserve Bank has decided to extend the scope of video KYC for new categories of customers covering small businesses, legal entities, and various other use cases.
“Keeping in view the COVID-related restrictions, regulated entities are being advised that customer account(s) where periodic KYC updating is due or pending, no punitive restrictions on operations of such account(s) be imposed until 31 December 2021,” RBI Governor said while announcing steps to deal with the current pandemic.
The Reserve Bank made an unscheduled announcement for ensuring congenial financial conditions and efficient functioning of the markets. There are several measures to deal with the evolving situation and enhance customer convenience.
1. RBI has decided to rationalise some components of the existing KYC norms.
2. Use of digital methods for updating KYC details.
3. Conversion of limited KYC accounts to complete KYC accounts.
4. Allowing video KYC for a range of businesses and use cases to ensure safety and ease customer concerns.
5. Extension of pending KYC deadline till 31 December 2021 – no punitive restrictions on the operation of customers’ accounts.
These are important steps by the RBI to deal with the COVID-19 pandemic, which facilitates access to formal banking while encouraging digital payments and financial inclusion in India. Further, the move allows banks and fintech companies to use video KYC criteria for new customers and provide financial services to businesses.