The Reserve Bank of India (RBI) has announced a set of major relaxations in the Know Your Customer (KYC) norms with a view to enhancing customer convenience, especially for those in rural and semi-urban areas. The circular, released on June 12, 2025, allows banking correspondents (BCs) to update KYC information and introduces Video-based Customer Identification Process (V-CIP) for both onboarding and KYC updating.

This step is aimed at reducing the friction that customers face while complying with KYC mandates and also helps in reactivating inoperative bank accounts, particularly under the Pradhan Mantri Jan Dhan Yojana (PMJDY) scheme.

KYC updation timelines extended for low-risk customers

According to the circular, customers flagged as ‘low-risk’ and whose KYC details have not been updated can now do so within a year or by June 2026, whichever is later. This will bring relief to a large segment of users who otherwise may have had their accounts restricted or deactivated.

Banks have been directed to complete the pending KYC updation process for these customers proactively, without causing inconvenience.

Video KYC and role of banking correspondents

The RBI has formally introduced V-CIP — Video-based Customer Identification Process as an alternative to physical KYC procedures. This facility allows customers to update their KYC or get onboarded into the financial system via a secure video process, eliminating the need for branch visits.

Further, the RBI has empowered banking correspondents (BCs) to undertake the KYC updation task. This move is particularly significant for semi-urban and rural areas, where physical bank infrastructure is limited.

Banks have been encouraged to deploy camps in remote regions to facilitate mass-scale KYC updates, especially for accounts that may have become dormant due to compliance issues.

Reviving inoperative accounts

A separate circular issued by the RBI states that these KYC measures are also applicable for reactivating inoperative accounts, including PMJDY accounts. The central bank has observed that many Jan Dhan accounts remained inoperative due to the challenges faced in updating KYC.

Since many of these account holders are beneficiaries of Direct Benefit Transfer (DBT) schemes, their inability to access benefits due to KYC delays was causing serious hardship.

By allowing BCs and V-CIP, the RBI aims to streamline access to government benefits and ensure smooth functioning of financial inclusion programmes.

Industry response and ecosystem impact

The Payments Council of India (PCI) welcomed the move, stating that these changes strike a balance between regulatory compliance and customer ease.

In a statement, PCI said:
“Simplifying KYC while maintaining regulatory safeguards will enable the ecosystem to onboard customers faster, reduce friction, and accelerate the adoption of formal financial services.”

Industry experts also believe that the V-CIP framework, if implemented effectively, can drastically reduce the cost and time involved in KYC completion, particularly for migrant workers, rural households, and beneficiaries of small-ticket financial schemes.

Push for digital and inclusive banking

These reforms are part of RBI’s larger effort to modernise and digitise banking services while ensuring that no customer is excluded from the formal banking system. As KYC remains a cornerstone of anti-money laundering (AML) and combating financing of terrorism (CFT) protocols, these relaxations still preserve the integrity of regulatory objectives.

The current measures align with the government’s broader push for financial inclusion, digital empowerment, and paperless governance, especially in last-mile delivery of services.

Conclusion

By allowing banking correspondents to update KYC and introducing video KYC for onboarding and account reactivation, the RBI has taken a decisive step toward inclusive, accessible, and technology-driven banking. With millions still dependent on basic banking services for subsidy and welfare transfers, this initiative could eliminate a major hurdle in accessing the financial system for India’s most underserved communities.

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