The Reserve Bank of India (RBI) on November 28, 2025, issued the Reserve Bank of India (Small Finance Banks – Know Your Customer) Directions, 2025 for public comments. The consolidates and updates the KYC, Anti-Money Laundering (AML), and Countering the Financing of Terrorism (CFT) framework for Small Finance Banks (SFBs), aligning it with global standards such as those set by the Financial Action Task Force (FATF). It derives authority from multiple legislations, including the Prevention of Money Laundering Act, 2002 (PMLA) and the Banking Regulation Act, 1949, and aims to ensure the integrity and stability of the financial system by preventing its misuse for money laundering and terrorist financing.
The directions require each SFB to formulate a Board-approved KYC policy covering four key elements—Customer Acceptance Policy, Risk Management, Customer Identification Procedures (CIP), and Transaction Monitoring. The framework mandates a Risk-Based Approach (RBA) for customer due diligence (CDD) based on the nature of products, services, geography, and delivery channels. Detailed definitions are provided for key concepts such as beneficial ownership, digital KYC, video-based customer identification (V-CIP), non-face-to-face customers, and small accounts, along with procedural clarity on acceptable identity and address documents, including Aadhaar-based and digital verification methods.
Further, the emphasizes comprehensive risk assessment, group-wide AML/CFT policies, and annual reviews of risk exposure. Banks are required to conduct periodic KYC updates, ensure robust controls for mobile number changes in Aadhaar-based accounts, and maintain transparent correspondent banking relationships with prior Board approval. The overall framework seeks to strengthen compliance culture, enhance monitoring of suspicious transactions, and align SFBs’ KYC standards with global best practices to safeguard financial integrity.
These Directions shall come into force with immediate effect.
[Notification No. RBI/DOR/2025-26/200 DOR.AML.REC.No.119/14.01.007/2025-26]
