AI-powered Central KYC announced in Budget 2025: Here are key upgrades

The revamped Central KYC aims to simplify and standardise KYC procedures across the financial sector, ensuring greater security and efficiency

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In a bid to streamline financial transactions and enhance ease of doing business, the Union Budget 2025 has introduced a revamped Central KYC (Know Your Customer) registry, set to roll out this year. The new framework aims to simplify and standardise KYC procedures across the financial sector, reducing bureaucratic hurdles and ensuring greater security and efficiency.

 

Why is KYC important and where is it used

 

KYC is a regulatory requirement that verifies a customer's identity to prevent fraud, money laundering, and financial crimes. It ensures compliance with anti-money laundering laws and protects businesses from identity theft and fraudulent transactions.

 

KYC is widely used in banking, insurance, stock markets, digital payments, telecom, real estate, cryptocurrency, mutual funds, e-commerce, and government welfare schemes. Financial institutions use it to assess risk, prevent fraud, and ensure transparency. Telecom companies require KYC for SIM card issuance, while stockbrokers and mutual funds verify investors before transactions.

 

KYC can be conducted through offline, digital (e-KYC), or video verification methods. 

 

What is the Central KYC?

 

The CKYC registry is a centralised database of customer KYC records that can be accessed across various financial institutions. It eliminates the need for individuals to submit their documents multiple times when engaging with different banks, insurance companies, and other financial service providers.

 

Key features of CKYC

 

• Uniformity in KYC procedures across the financial sector
• Single KYC identifier linked to individual ID proofs
• Digitally secured storage of KYC data
• Real-time updates and notifications to financial institutions
• Significant cost reduction by avoiding duplication of records

 

What are the key upgrades in Central KYC?

 

The Budget 2025 announcement highlights key enhancements to CKYC, including technology-driven verification methods and seamless integration with digital platforms.

 

Key upgrades include:

 

AI-powered KYC verification: Advanced Artificial Intelligence (AI) algorithms and face-matching technology will be used to verify identities and detect duplicate records.

 

Integration with digital identity platforms: CKYC will be integrated with DigiLocker, allowing customers to store and retrieve their KYC documents securely.

 

Customer access and consent management: Individuals will get view-only access to their KYC details. Customers can approve or deny access to their KYC data through OTP-based or face authentication.

 

Real-time verification with government databases: KYC documents uploaded by financial institutions will be cross-verified with issuing authorities to prevent fraud.

 

Enhanced security and transparency: Financial institutions will receive metadata on the frequency of KYC record updates over the past five years, helping in risk assessment.

 

No charges for uploading KYC records: To encourage adoption, there will be zero fees for uploading KYC records.

 

Simplified process for periodic KYC updates

 

Under existing Reserve Bank of India (RBI) guidelines, financial institutions must periodically update KYC details to prevent fraud and money laundering. The new system will streamline periodic updates with the following provisions:

 

High-risk customers: KYC updates every two years.

 

Medium-risk customers: KYC updates every eight years.

 

Low-risk customers: KYC updates every ten years.

 

If no changes are required, customers can simply submit a self-declaration via email, mobile app, or ATM.

 

For address changes, customers will be required to provide self-declaration, which will then be verified within two months using postal verification or in-person checks.

 

With the revamped Central KYC registry, the government is taking a significant step toward a more seamless, secure, and user-friendly financial ecosystem in India.