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BankingNABARD / RBI

KYC Reform in India: Gaps and Fixes Suggested

28 July 20251 min read
BANKING & FINANCEKYC Reform inIndia: Gaps andFixes Suggested28 July 2025safalsetu.com

Why in the news

A commentary argued that KYC is a burden in rural India and needs better enforcement, not new laws.

Key facts

  • KYC is mandatory for banks, insurers, brokers, mutual funds, demat accounts and NPS.
  • Repositories: CKYC (CERSAI) for banking and insurance; KRAs (SEBI) for securities.
  • Aadhaar, mobile and Jan Dhan widened access; DBT encouraged KYC completion.

Problems

  • RBI allows digital re-KYC for low-risk accounts, yet banks demand visits and papers, causing blocked pensions and wage loss.
  • Banks face no penalty for ignoring norms; CKYC does not validate data.

Way forward

  • Make RBI norms enforceable with penalties.
  • Upgrade CKYC to validate data.
  • Sync updates across entities; adopt SEBI’s portability model.

Exam angle

  • Contrast: CKYC stores; KRAs validate and enable reuse.

Test yourself

1. Which body runs the CKYC repository for banking and insurance KYC?

The notes say CKYC is by CERSAI.

2. What main advantage do SEBI's KRAs have over CKYC, according to the notes?

KRAs validate data and let KYC be reused across intermediaries.

3. What does RBI allow for low-risk accounts in re-KYC?

The notes say RBI permits digital re-KYC for low-risk accounts.

This topic is part of Daily Current Affairs 27 & 28 July 2025 (13 topics).

All topics of the dayDay quizJuly 2025

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