The government is also working on amendments to the Banking Regulation Act, the Banking Companies Act and the Reserve Bank of India Act to improve bank administration and enhance investor safety.
The Central Government and the Banking Regulatory Body are keeping a close watch on such big money accounts whose KYC deal has not been updated. Its purpose is to identify the risk of any method associated with such accounts. In such a situation, apart from high net worth individuals, trusts, associations, societies and clubs, some institutions are being monitored. An official in the know of the matter said in a media report that the issue was raised after transactions from some accounts were scrutinized and it was found that their KYC had not been updated.
KYC will have to be completed by June
The Reserve Bank of India has directed banks to complete KYC updation on a recurring basis for all customers with active accounts by June 2023. According to a senior bank official, the RBI had barred lenders from freezing non-KYC accounts till March 2022 due to Kovid-19. However, some of these accounts are not updating their KYC even after repeated requests.
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Banks will seek clarification from RBI
According to another bank official, it is still not clear whether the lenders can partially freeze these accounts on their own or not. He said that now we will seek clarification from RBI on this subject and whether banks can have a board approved policy to freeze accounts where KYC updates are pending.
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‘Risk Based’ KYC
The country’s Finance Minister Nirmala Sitharaman had suggested in the budget speech of FY 2024 that the KYC process should be simplified by switching to a ‘risk based’ approach from the current ‘one size fits all’ method. The Finance Minister had said that the KYC system will be encouraged to meet the needs of the Financial Sector Regulators Digital India. Further strengthening of the central KYC format is being discussed by banks and regulators to prevent multiple accounts with different identities in the banking system. The government is also working on amendments to the Banking Regulation Act, the Banking Companies Act and the Reserve Bank of India Act to improve bank administration and enhance investor safety.