SEBI’s Proposal to Simplify KYC for Non-Residents
The Securities and Exchange Board of India (SEBI) has put forward a plan to simplify the Know Your Customer (KYC) process for individuals living outside India (PROI). This initiative could allow qualified Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), and foreign nationals to complete the digital onboarding process for investing in Indian securities while remaining abroad.
This proposal addresses a significant obstacle in the current system, which mandates that clients be physically present in India for digital onboarding. SEBI aims to enable eligible individual PROIs from countries that comply with the Financial Action Task Force (FATF) guidelines to submit their KYC information and relevant documentation online from their home countries.
Such a change may facilitate easier access for foreign investors looking to engage with the Indian securities market without the hassle of traveling to India just to fulfill KYC requirements.
Proposed Changes for NRIs, OCIs, and Foreign Nationals
According to the proposed framework, individual PROIs residing in FATF-compliant countries will have the option to complete their KYC process digitally, bypassing the need for a physical presence in India.
This process is open to NRIs, OCIs, and foreigners who meet the outlined criteria. However, it’s important to note that those wishing to register as foreign portfolio investors will still need to follow a separate framework dedicated to FPIs.
The proposal also includes new safeguards to ensure security. For instance, KYC verification would require the presence of an authorized representative, alongside capturing the investor’s geographic location, like latitude and longitude, during onboarding.
The location gathered must correspond with the address shown on the investor’s identification documents. Additionally, intermediaries need to block connections coming from spoofed IP addresses.
So, this proposal doesn’t eliminate KYC checks but rather enables them to be carried out digitally from abroad, while enhancing safety through ID verification, location tracking, and measures against fraud.
SEBI has expressed that this change could significantly benefit PROIs who already hold bank accounts and want to engage with the Indian securities market without needing to be physically present in India during the onboarding stage.
KYC Records May Become Portable for Overseas Investors
Another aspect of SEBI’s proposal is to allow the KYC records of individual PROIs to be portable across various intermediaries. KYC Registration Authorities (KRAs) would treat these records as portable if the individual attributes are marked as ‘verified’ against official databases.
This could lessen the burden for foreign investors, who often have to repeat the KYC process multiple times when dealing with various SEBI-registered intermediaries.
Additionally, the regulator is considering permitting PROIs to self-declare their current addresses, provided that the submitted documents can be authenticated through official channels.
An intermediary may also depend on KYC completed by another SEBI-registered intermediary or an entity under another financial regulator, based on records accessible through the KYC system.
SEBI noted that this proposal comes in response to requests from stakeholders for a relaxation of the rules around physical presence, signature authenticity, and KYC portability.
The regulator highlighted that engaging with PROIs could tap into a growing investment pool for India, making it easier for the Indian diaspora to invest back home and funnel overseas savings into Indian capital markets.
These proposed changes are still in the works and await finalization by SEBI before implementation.
