Reserve Bank of India reiterates Aadhaar, PAN mandatory for bank accounts

RBI KYC norms Reuters file

The Supreme Court had last month indefinitely extended the deadline to link Aadhaar with private and non-subsidised government services like phone numbers and bank accounts till the Constitution Bench pronounces its final verdict on the validity of the Aadhaar scheme. The central bank made the announcement in a circular with updated Know-Your-Customer norms on Friday.

"Regulated entities (REs) have to ensure that no account is opened where the RE is unable to apply appropriate customer due diligence (CDD) measures, either due to non-cooperation of the customer or non-reliability of the documents/information furnished by the customer", said the central bank. However, small accounts will be subjected to certain conditions, such as there will be a cap on the number of monthly and annual transactions.

Entities regulated by RBI, such as banks, non-banking finance companies (NBFCs), payment system providers (PSPs) and prepaid payment instrument issuers (PPI Issuer) have been instructed to formulate a KYC policy which shall include a customer acceptance policy, risk management strategies, procedure for customer identification and means to monitor transaction of customers.

Recently, the Supreme Court had asked for a "less invasive" identification document than Aadhaar but the government told the court that the Aadhaar Act could not be made simpler.

The RBI has done away with sections relating to the use of other OVD by banks for address and identity proof.

Residents of Jammu and Kashmir, Assam and Meghalaya have been exempted from this rule. The Indian Banks' Association (IBA) is likely to convene a meeting to finalise issues that would be taken up with the RBI.

RBI said the KYC norms have been updated following the government's decision to update the "Prevention of Money Laundering" (PML) rules in June 2017.

The RBI, however, warned banks that the "information collected from customers for the objective of opening of account shall be treated as confidential and details thereof shall not be divulged for the goal of cross-selling, or for any other objective without the express permission of the customer".

Accounts, both deposit and borrowal, opened using OTP (one-time password) based eKYC (electronic KYC) will not be allowed for more than one year within which biometric based e-KYC authentication will have to be completed.

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