What changed
RBI issued a Master Circular consolidating all existing KYC/AML instructions for NBFCs, updated to June 30, 2010. It reaffirmed that NBFCs must adopt the same KYC/AML standards as banks, based on FATF and Basel Committee recommendations. The circular also reiterated that customer information must remain confidential and not be used for cross-selling without consent.
What it means for you
NBFCs must ensure their KYC/AML policies are board-approved and fully compliant with international standards to maintain global financial relationships. The circular tightens customer data privacy rules, preventing misuse of information for cross-selling. Lenders face increased compliance burden, especially in verifying customer identity and reporting suspicious transactions under PMLA.
What you must do
- Formalize and get board approval for KYC/AML policy within three months of July 1, 2010.
- Ensure full compliance with KYC/AML instructions (previously advised deadline was December 31, 2005).
- Restrict use of customer information to account opening only; obtain separate consent for cross-selling.
- Extend KYC/AML compliance to all agents and brokers collecting deposits on your behalf.
- Maintain records of transactions and customer identity as per PMLA requirements.
Who it affects
All Non-Banking Financial Companies (NBFCs), Miscellaneous Non-Banking Companies (MNBCs), Residuary Non-Banking Companies (RNBCs), Agents and brokers authorized by NBFCs
What is the deadline for board approval of KYC policy under this circular?
NBFCs must obtain board approval for their KYC/AML policy within three months from the date of this circular (July 1, 2010).
Does this circular apply to agents collecting deposits on behalf of NBFCs?
Yes, the circular explicitly states that KYC/AML guidelines apply equally to persons authorized by NBFCs, including brokers and agents.
Can NBFCs use customer data for cross-selling without consent?
No, customer information collected for account opening must be kept confidential and cannot be used for cross-selling or other purposes without separate consent.