RBI eases KYC rules for FPIs: How it affects you
What's the story
The Reserve Bank of India (RBI) has simplified the know your customer (KYC) process for foreign portfolio investors (FPIs) at rural and urban co-operative banks. The central bank has now allowed FPIs to submit an original certified copy of their KYC documents, instead of having the bank compare it with the original in person. This change is effective immediately and was previously offered only to Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs).
Expanded options
Who can certify the documents?
The RBI's revised KYC guidelines now permit FPIs to submit a certified copy of their documents from an authorized official of an overseas branch of a scheduled commercial bank.
They can be registered in India or be a branch of an overseas bank that has a relationship with an Indian bank.
The certification can also be done by a notary public abroad, court magistrate, judge, or the Indian Embassy/Consulate General in the non-resident customer's country.
Compliance requirements
What's the existing KYC framework?
The RBI's existing KYC framework mandates banks to compare Aadhaar possession proof copies or other officially valid documents with originals when offline verification isn't possible.
An authorized officer has to record this comparison.
However, the new amendments extend an alternative certification facility to FPIs under the Prevention of Money Laundering Act, 2002, and its Maintenance of Records Rules, 2005.
No relaxation
What does this mean for banks?
Despite the changes, it's important to note that the RBI's amendment doesn't change the underlying requirement for banks to conduct KYC checks on FPIs.
The bank must still compare Aadhaar proof copies or other official documents with originals and record this comparison.
The amended provision simply offers an alternative route where banks can obtain an original certified copy from specified authorities for FPIs.