RBI makes KYC easier: Banks must send three reminders before account freeze

Banks must give written reminders before KYC deadline, says RBI

In a move aimed at strengthening consumer protection and improving service delivery, the Reserve Bank of India (RBI) on Thursday issued fresh directives requiring all banks and regulated entities to issue timely and repeated notifications to customers for periodic Know Your Customer (KYC) updates. 

 

The instructions, part of the newly released RBI Know Your Customer (KYC) (Amendment) Directions, 2025, are to be implemented no later than January 1, 2026, and apply across customer categories, including accounts linked to Direct Benefit Transfers (DBT), Electronic Benefit Transfers (EBT), and Pradhan Mantri Jan Dhan Yojana (PMJDY).

 

What’s changing?

The RBI has noted significant delays in KYC updates across various segments—especially government-linked schemes—and has responded by mandating a more proactive approach from banks and other regulated entities (REs).

 

Key changes include:

 

Advance Notifications: Before the KYC update is due, banks must send at least three advance notices, including one physical letter, using available communication channels like SMS, email, or app notifications.

 

Post-Due Reminders: If the KYC is still not updated after the due date, three additional reminders must be sent, including another physical letter.

 

Clear Instructions & Help Channels: These communications must provide simple instructions, support escalation mechanisms, and clearly state the consequences of non-compliance.

 

Audit Trail Required: Banks must record each notification attempt in their system to create an audit trail.

 

Customer-friendly updates

To further ease the burden on customers—especially those in rural areas—the RBI has now allowed Business Correspondents (BCs) to assist in the KYC updating process.

 

Customers whose details remain unchanged or who have updated only their address can now submit self-declarations through a BC. These will be digitally recorded in the bank’s systems for compliance.

 

In the case of low-risk individual customers, banks are required to continue allowing transactions even if the KYC is overdue, provided the update is completed by June 30, 2026 or within one year of the KYC falling due—whichever is later.

 

Rural focus and special drives

Recognising that the KYC pendency is often higher in rural and semi-urban areas, the RBI has also instructed banks to organise KYC update camps and awareness campaigns in these regions. Banks have been encouraged to take an empathetic approach toward account activation and customer assistance.

 

Other key highlights

The amendment also includes updates related to inoperative accounts and unclaimed deposits, although the central bank has yet to release further details on those provisions.