The Securities and Exchange Board of India (SEBI) has recently proposed easing the Know Your Client (KYC) process for individual Persons Resident Outside India (PROIs). This includes Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), and foreign nationals.

The proposal would allow individual PROI clients in Financial Action Task Force (FATF)-compliant countries to complete digital onboarding without being physically present in India. Intermediaries would be allowed to accept KYC records and related documents digitally from such clients.

KYC is the process through which a financial intermediary verifies a client's identity and other details. SEBI's consultation paper proposes changes to several steps in this process for clients who are outside India.

At present, the KYC framework requires the client's physical presence in India for digital onboarding. SEBI has proposed removing this requirement for PROI clients located in FATF-compliant countries.

Under the proposed framework, a PROI client could submit the KYC form either physically or digitally. A digital KYC form could be submitted using an electronic signature.

A scanned copy of a physical KYC form under electronic signature would also be permitted. This would give clients outside India an alternative to sending the physical form by courier.

SEBI has also proposed greater flexibility for specimen signatures. A client could submit a cropped image of the specimen signature while submitting the KYC documents digitally.

The client would then have to provide a wet signature before the intermediary during Video In-Person Verification (VIPV). The intermediary would verify whether the wet signature matches the signature submitted earlier.

The proposal also provides alternatives where the original identity or address document is not produced for verification. These include equivalent electronic documents through DigiLocker and documents issued by the issuing authority through a verifiable mechanism.

Aadhaar-based electronic KYC authentication could also be used. Copies of documents attested by specified certifying authorities would be another option.

The specified authorities include notaries, authorised officials of overseas branches of scheduled commercial banks registered in India, and branches of overseas banks that have relationships with Indian banks. They also include court magistrates, judges and Indian embassies or consulates in the country where the client resides.

Physical In-Person Verification (IPV) would continue to be required. If physical IPV is not feasible, the intermediary could conduct VIPV.

The proposed safeguards include recording the client's consent and carrying out liveness checks. The process would also require random actions by the client during the video interaction and live GPS coordinates.

The system would have to prevent connections through spoofed IP addresses, VPNs, or proxy servers. The client's location would also have to match the country specified in the KYC form and the officially valid or deemed officially valid document.

The proposal further requires the client's photograph captured during VIPV to match the photograph submitted in the KYC documents. The process would also require end-to-end encryption.

VIPV would have to be conducted by an authorised official of the intermediary. The process would also be subject to concurrent audit.

SEBI has separately proposed making KYC records of individual PROIs portable. This would mean that a client would not have to repeat the KYC process when approaching another intermediary.

Attributes in the KYC record that have been verified with official or source databases would be tagged as "validated." Other intermediaries could use these validated details while carrying out additional checks where required based on the client's risk profile.

The proposal would also allow an intermediary to rely on KYC undertaken by another SEBI-registered intermediary. It could also rely on KYC undertaken by an entity regulated by another financial sector regulator.

The intermediary may rely on records obtained from the KYC Registration Agency (KRA). For KYC undertaken by an entity regulated by another financial sector regulator, the records may be obtained from the Central KYC Records Registry (CKYCRR) through the KRA.

The intermediary relying on the existing KYC would nevertheless remain ultimately responsible for its client's KYC. It would also have to undertake enhanced KYC measures proportionate to the client's risk profile.

SEBI's draft circular says the proposed provisions would come into effect 30 days after the circular is issued. The proposed provisions would apply to the onboarding of PROI clients except those residing in FATF non-compliant countries.

The existing requirements would continue to apply to PROI clients in FATF non-compliant countries. KYC undertaken before the proposed circular comes into effect would continue to be governed by the existing KYC provisions.

SEBI has invited public comments on the proposal until September 4, 2026. 

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