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Recently, RBI (Reserve Bank of India) introduces some essential amendments to the Master Direction on KYC along with updating its list of documents required for the identification of the individuals. Earlier, RBI had disqualified the use of electronic KYC for non-benefit taking customers. Hence, it now allows banks, NBFCs and Fintechs to carry out Aadhar authentication/offline verification of an individual who voluntarily uses his or her Aadhar number for identification purposes.
The KYC details allow banks and other regulated entities including financial institutions, NBFCs, prepayment instrument issuers, payment system providers and agents of the Money Transfer Service Scheme to understand their customers and their financial dealings better. As a result, it helps them manage their risks.
The RBI move has opened up opportunities for the NBFCs/Fintech sector, with innovative means of leveraging the Aadhaar database.
Significant changes carried out in the Master Direction are listed hereunder:
Customer identification of “Individuals”
Submitting PAN Details
The whole notification can be read here
These changes come after the amendments to the Prevention of Money-laundering (Maintenance of Records) Rules, 2005. After the Supreme Court struck down few sections of the Aadhaar Act and Regulations such as Section 57, it thereby nullified the biometric e-KYC model used by telecom companies and banks for customer verification and onboarding. The government proposed to amend the Aadhaar Act, Prevention of Money Laundering Act and the Indian Telegraph Act.
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