Rules / regulations / directions
Master Direction – Know Your Customer (KYC)
Reviewed by CA Nikhil Gupta · Last reviewed 18 September 2026
RBI Master Direction on KYC, read with the Prevention of Money-laundering Act/Rules and entity-specific enabling statutes. It is a cross-law compliance instrument, not subordinate legislation under the RBI Act alone.
Status update (20 Sep 2026)
RBI repealed the Master Direction – Know Your Customer (KYC) Direction, 2016 on 28 November 2025 and replaced it with entity-specific KYC Directions, 2025 (for example the Reserve Bank of India (Commercial Banks – Know Your Customer) Directions, 2025). The framework described below is the 2016 structure; identify the Direction issued for the specific regulated entity and use its text for any current compliance question.
Scope, legal role and applicability
RBI’s KYC framework for customer acceptance, identification, due diligence, beneficial ownership, risk management, ongoing monitoring and periodic updation. Its legal basis is cross-statute and entity-specific; this hub links it where NBFC obligations intersect Chapter IIIB.
Operative requirements
- Maintain a Board-approved KYC policy covering customer acceptance, risk management, customer identification procedures and monitoring.
- Complete Customer Identification Procedure using permitted Officially Valid Documents/equivalent routes and use CKYCR records where the Direction requires or permits.
- Identify and verify the beneficial owner for non-individual customers using the applicable ownership/control thresholds and control tests.
- Risk-rate customers and apply enhanced due diligence where the Direction requires, including for PEPs and higher-risk relationships.
- Use V-CIP only within the prescribed controls; preserve the video, audit trail, geo/time controls and officer authentication required by the current Direction.
- Perform ongoing due diligence and periodic KYC updation on the applicable risk-based cycle; do not wait for a transaction failure to discover expired/changed information.
- Screen and handle wire-transfer/originator-beneficiary information and sanctions obligations under the applicable KYC/AML framework.
Records, forms and annexures
Keep customer acceptance/risk classification, CIP evidence, CKYCR identifier, beneficial-owner declaration/evidence, V-CIP record where used, screening results, periodic-update record and exception/escalation approvals.
Practical advisory example
Facts and issue. A corporate borrower has layered shareholding and asks the NBFC to accept only the company PAN and certificate of incorporation. The KYC review must separately identify beneficial owners, verify them using the Direction and record the risk classification and any enhanced due diligence.
Working method. Classify the entity/product, identify the exact paragraph in force on the event date, test exceptions and transitional provisions, then retain the evidence listed above. Do not rely on the title of the Direction or an old Master Direction version.
RBI Act / cross-law linkage
Official source and version control
Questions and answers
What is the main purpose of Master Direction – Know Your Customer (KYC)?
RBI Master Direction on KYC, read with the Prevention of Money-laundering Act/Rules and entity-specific enabling statutes. It is a cross-law compliance instrument, not subordinate legislation under the RBI Act alone.
Which part of Master Direction – Know Your Customer (KYC) should be checked first?
Start with KYC policy and risk management and then apply this requirement: Determine whether the institution and product fall within the Master Direction.
What record should be retained?
Use entity-specific RBI/PMLA reporting and customer-document workflows; preserve the current Master Direction version and amendment date.
Does this page treat the RBI Act as the only enabling law?
No. Cross-law RBI direction principally grounded in banking/PMLA authorities; linked here where relevant to regulated-entity onboarding and customer controls.