'Know Your Customer' data upload: Foreign investors seek exemption

Overseas investors have reached out to the Securities and Exchange Board of India (Sebi) and the Reserve Bank of India (RBI), seeking exemption for all foreign entities — including foreign portfolio investors (FPIs), FDIs, foreign venture capital investors (FVCIs), and foreign currency convertible bonds (FCCB) investors — from uploading KYC data on the central registry.

The RBI had in December said that all regulated entities have to upload ‘Know Your Customer’ data pertaining to the accounts of legal entities opened on or after April 1, 2021, to the Central KYC Registry (CKYCR), which serves as the central record for KYC information of all the customers of financial institutions.

Subsequently, on March 10, Sebi issued a circular asking regulated entities to do the same but exempted FPIs from the provisions of the circular. 

The Asian Securities Industry and Financial Markets Association (ASIFMA), a regional trade association with over 125 member firms that represents the interests of bulge bracket foreign investors, has now asked the RBI for a similar exemption.

Separately, in a letter written to Sebi, the association has asked for a three-month extension to the applicability of the Sebi circular from April 1, pending clarification from the RBI on the exemption for FPIs and other foreign investors. It has argued that all the existing and new foreign non-individual clients should continue to be serviced through the know-your-client registration agencies, or KRAs, to ensure uniformity from a market access perspective.

"These types of clients are unlikely to have other relationships in the Indian financial system and having their KYC on the CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest of India) platform will not yield benefits as the Sebi-registered intermediaries will already have access to KRA," it said, adding that the existing risk-based KYC requirement applicable to FPIs are also applicable to FDI, FVCI, and FCCB accounts, if the same entities are registered as FPIs.

"Thus, we understand that for FPI-linked accounts, the CKYCR circular is not applicable. The CKYCR should service individual accounts as well as domestic legal entities. We request that the RBI and Sebi issue a clarification on the same."

The CERSAI has been authorised to carry out the functions of CKYCR.

The ASIFMA further said that the existing client KYC data and documentation on KRAs, especially of domestic clients, be migrated to the CKYCR by KRAs and the latter should be responsible for uploading KYC documents of legal entities on the CKYCR portal. Additionally, only incremental data should be sought and uploaded on the CKYCR.