Discover the KYC Guide in India. Explore the required documents, regular updates, eKYC, and tips for the best KYC practices in 2025. KYC is for providing transparency in financial activities and preventing fraudulent events. All financial institutions are required to follow the Know Your Customer (KYC) process so that they can reduce risk factors.
What Is KYC and Why Is It Mandatory in India?
Know Your Customer (KYC) is the mandatory process to verify the customers’ identity and assess their risk factors. Under the Prevention of Money Laundering Act (PMLA) of 2002, KYC prevents money laundering and terrorist financing crimes.
The aim of the KYC process is to:
- Confirm customer identity,
- Detect suspicious transactions,
- Improve anti-money laundering (AML) compliance frameworks that align with international standards.
India enforces KYC because financial institutions and businesses must protect their transactions and support domestic financial security.
Who Regulates KYC in India?
KYC compliance in India is regulated by different bodies depending on the industry. Each sector sets specific guidelines to make sure the Prevention of Money Laundering Act (PMLA) and broader AML standards are consistently applied. These guidelines are:
- Reserve Bank of India (RBI) is responsible for supervising KYC for financial institutions such as banks, NBFCs, and digital payment systems.
- Securities and Exchange Board of India (SEBI) regulates KYC rules to protect investors.
- Insurance Regulatory and Development Authority of India (IRDAI) determines KYC regulations for insurance companies.
- Financial Intelligence Unit-India (FIU-IND) monitors suspicious transaction reports to detect AML activities.
What Are the KYC Documents Accepted in India?
In India, individuals must provide officially recognized identity documents to complete the KYC process. Some of the accepted documents are as follows:
- Aadhaar Card
- PAN Card
- Passport
- Voter ID
- Driving License
- Utility bills (to verify client address)
In 2023, the Reserve Bank of India (RBI) updated its KYC Master Directions to declare the required documentation so that the compliance process can be simplified. These guidelines help institutions consistently stay financially transparent.
What Are the KYC Requirements in India?
In India, Know Your Customer (KYC) requirements are managed by the Prevention of Money Laundering Act (PMLA), the Reserve Bank of India (RBI), SEBI, IRDAI, and FIU-IND depending on the industry type.
Our Sanction Scanner Team has summarized the KYC requirements for you:
● Customers must go through identity verification. This can be done with their Aadhaar,PAN card, passport, or voter ID.
● Customers must provide proof of address. This can be done with their utility bills, rental contracts, and bank statements.
● Customers verify identity with a photograph submission. This can be done with a passport-size photo.
● Another key document is the beneficial ownership disclosure. Companies and individuals must be transparent about who owns or controls them.
● Video KYC or e-KYC are beneficial digital verification tools. These paperless methods offer secure and efficient verification processes.
● PEP screening and EDD are required for high-risk individuals such as Politically Exposed Persons. The aim here is to make sure Enhanced Due Diligence checks their background and monitors their transactions.
● Ongoing KYC Updates are for the periodical review of customer information depending on their risk levels low, medium, or high.
What is eKYC and How Does It Work with Aadhaar?
The Electronic Know Your Customer (eKYC) process is a digital method and an advanced technology that simplifies identity verification. Empowered by the Unique Identification Authority of India (UIDAI), a fast, paperless, and secure eKYC process is provided with the use of Aadhaar.
How does eKYC Work?
After customers share their Aadhaar numbers and grant consent for identity verification, the Unique Identification Authority of India (UIDAI) verifies customer details. eKYC simplifies the process of adding new customers and it also removes the burden of any extra costs or paperwork. Fintech, telecom, banking, and insurance industries need eKYC to make sure customers’ identity is verified.
What are the Key Benefits of eKYC?
● Companies can have faster onboarding processes.
● Companies will not have any extra paperwork or manual checks, which offers lower operational costs.
● Companies secure identification processes with improved regulatory compliance.
What are the Risk Management Practices in India?
Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD) processes are critical components of financial activities compliant with the Anti-Money Laundering (AML) framework. Under the guidelines of the Reserve Bank of India (RBI) and the Prevention of Money Laundering Act (PMLA), these processes make sure financial institutions maintain a professional control mechanism.
Customer Due Diligence (CDD) is the process of verifying customer information through these key steps:
- Collecting ID documents such as Aadhaar, PAN, proof of address
- Reviewing customer transactions
- Determining the risk level
Enhanced Due Diligence (EDD) is the process of detecting high-risk customers or suspicious transactions. It is a closer review of funds, financial history, and asset ownership. EDD is needed when there are large amounts of money transactions, dealings with politically exposed persons (PEPs), and connections with high-risk countries such as tax havens. Institutions must properly check these details and stay compliant with legal requirements.
Is Video KYC Allowed in India?
Yes, Video KYC is permitted in India. The Reserve Bank of India (RBI) accepted Video Customer Identification Process (VCIP) as an identity verification method in 2020. VCIP allows sectors such as fintech and InsurTech to verify customers remotely which reduces expenses and fastens the process.
Key Features of Video KYC:
- Face verification with secure video calls
- Confirming the costumer location
- Confirming Aadhaar to validate identity
- Professionals conducting manual review
How Often Should KYC Be Updated in India?
KYC is not conducted only once. Customer information must be regularly checked to detect risk levels. For low-risk customers, the details must be updated every 10 years. For medium-risk customers, it is every 8 years and for high-risk customers, it is every 2 years.
Periodic updates ensure customer data is accurate and align with currency AML standards.
What are the KYC Penalties in India?
- Customer accounts may be blocked. Their funds and transactions may be restricted.
- RBI may impose penalties to financial institutions that might damage their credibility.
Advanced KYC Compliance Tools for Indian Enterprises
Managing KYC compliance in India can be complex. Sanction Scanner offers professional tools that simplify this process and strengthen risk management. Check Sanction Scanner’s features below.
- Name Screening: Determine the risk factors of customers.
- Automated Risk Scoring: Find out customer’s tendency to commit financial crimes.
- Ongoing Monitoring: Track profile changes and detect risk factors.
- Seamless Integration: Get benefit of our compatible APIs integrated with Indian fintech systems and NBFC platforms.
FAQ's Blog Post
KYC (Know Your Customer) is a mandatory process for verifying the identity and address of customers. It helps prevent financial fraud, money laundering, and other illegal activities.
The Reserve Bank of India (RBI) regulates and enforces KYC norms for banks and financial institutions. SEBI and IRDAI also oversee KYC for securities and insurance sectors.
Commonly accepted KYC documents include Aadhaar card, PAN card, passport, voter ID, and utility bills. These documents serve as proof of identity and address.
Aadhaar is not mandatory but is one of the most commonly used documents for e-KYC. Customers can choose other officially valid documents (OVDs) if they prefer.
e-KYC is a paperless process that verifies customer identity using Aadhaar and biometric or OTP-based authentication. It is widely used by banks and fintech platforms.
Banks may ask customers to update their KYC periodically based on risk categorization. Generally, low-risk accounts are updated every 10 years, and high-risk every 2 years.
Yes, KYC can be completed online through video KYC or Aadhaar-based e-KYC methods. This has simplified the onboarding process, especially for digital banking services.
Failure to complete KYC may lead to restrictions on your account, such as limits on transactions or even account freeze. It's essential for maintaining active financial services.