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Rationalisation of KYC- Measures for relief or technical advancement?

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-Kanakprabha Jethani and Anita Baid (finserv@vinodkothari.com)

Background

Considering the resurgence of the Covid-19 pandemic on the economy, the RBI Governor, on May 5, 2021, announced several measures with a view to infuse liquidity in the economy, avoid another wave of borrower defaults[1] as well as aid in ease of business during the lockdown.

Out of the several measures announced by the Governor, one was to simplify the KYC process, which is the initial step of any lending transaction. Some of the amendments seem to provide immediate relief from compliance requirements and some are intended to encourage carrying out KYC compliances electronically, given the social distancing norms.

In this regard, the RBI has issued the following notifications:

  1. Periodic Updation of KYC – Restrictions on Account Operations for Non-compliance dated May 5, 2021[2]
  2. Amendment to the Master Direction (MD) on KYC dated May 10, 2021[3]

In this article we intend to discuss the prima facie implications of the amendments introduced by the aforesaid notifications. Read more →