KYC policy, accountable officers and non-outsourcing

Separate policy approval, operational accountability, the Designated Director and the Principal Officer.

Published by Finin2min · Updated 24 October 2026

How this provision works

Paragraph 6 requires approval by the Board or a committee to which it delegates power. The policy includes customer acceptance, risk management, identification and transaction monitoring, periodic updation and any additional exceptional update requirements.
Under paragraph 12, allocate senior-management responsibility, independently evaluate compliance, use concurrent/internal audit and submit quarterly audit notes/compliance to the Audit Committee. Paragraph 13 bars outsourcing the decision on KYC compliance.
The Designated Director ensures overall ChapterIV PML Act compliance. The Principal Officer handles monitoring and legally required information/reporting. The Principal Officer must not also be nominated as Designated Director.
Communicate the prescribed identity/contact particulars of both officers to FIU-IND and RBI. Buying a vendor screening tool does not transfer these legal responsibilities.

Practical illustration

A vendor returns a “KYC passed” flag. The bank still decides whether its KYC obligations are met, maintains the responsible officer roles and carries out the required audit/compliance reporting.

The example is illustrative; it is not a reported company or court case.

Questions answered

Must the Principal Officer also be the Designated Director?

No. Paragraph 14(3) expressly prohibits that combination.

Does delegation of policy approval permit outsourcing compliance decisions?

No. Paragraph 13 separately prohibits outsourcing that decision-making function.

Primary source and edition

Commercial Banks KYC Directions 2025, updated 1 October 2026; current tax-form transition cross-checked against the official e-filing department. Commercial Banks KYC Directions paragraphs 6–15.

Open the official instrument at this provision

Legal effect follows the instrument’s commencement and amendment provisions; a website upload date does not by itself change the law.

Related primary authorities

Scope and source editions

This explanation uses the Commercial Banks KYC Directions 2025, updated 1 October 2026, retrieved 24 October 2026. Its commercial-bank definition excludes Small Finance Banks, Payments Banks and Local Area Banks; those have separate directions. NBFCs also have a separate KYC direction and some paragraph numbers/procedures differ. Tax-form transitions are corroborated by current official e-filing guidance rather than copied from older tax-form references in the RBI consolidation.

How this provision works

Practical illustration

Questions answered

Primary source and edition

Related primary authorities

Related resources and source collections