With an aim to simplify know-your-customer (KYC) related procedure for opening bank accounts by foreign portfolio investors (FPIs), the Reserve Bank of India (RBI) has allowed banks to accept KYC done by a custodian or an intermediary regulated by Securities and Exchange Board of India (SEBI).
In a circular, RBI says
, "Such eligible or registered FPIs may approach a bank for opening a bank account for the purpose of investment under portfolio investment scheme (PIS) for which KYC documents prescribed by the RBI would be required. For this purpose, banks may rely on the KYC verification done by the third party (i.e. the custodian or SEBI regulated intermediary) subject to the conditions laid down in Rule 9 (2) [(a) to (e)] of the Prevention of Money Laundering (Maintenance of Records) Rules (Rules)."
SEBI has already rationalised KYC norms for the entry of FPIs. RBI says it has been receiving suggestions regarding rationalising KYC norms in case of FPIs for opening bank accounts along similar lines.
FPIs have been categorised by SEBI based on their perceived risk profile. In terms of Rule 9 (14)(i) of the Rules, simplified norms have been prescribed for those FPIs, who have been duly registered in accordance with SEBI guidelines and have undergone the required KYC due diligence and verification prescribed by SEBI through a custodian or intermediary regulated by the market regulator.
RBI has requested SEBI to advise regulated custodians and intermediaries to share the relevant KYC documents with the banks concerned based on written authorisation from the FPIs.
Accordingly, RBI says, a set of hard copies of the relevant KYC documents furnished by the FPIs to the custodians and regulated intermediaries may be transferred to the concerned bank through their authorised representative. "While transferring such documents, the custodian and regulated intermediary shall certify that the documents have been duly verified with the original or notarised documents that have been obtained, where applicable. In this regard, a proper record of transfer of documents, both at the level of the custodian and regulated intermediary as well as at the bank, under signatures of the officials of the transferor and transferee entities, may be kept."
"While opening bank accounts for FPIs in terms of the above procedure, banks may bear in mind that they are ultimately responsible for the customer due diligence done by the third party (i.e. the custodian/regulated intermediary) and may need to take enhanced due diligence measures, as applicable, if required. Further, banks are required to obtain undertaking from FPIs or a global custodian acting on behalf of the FPI to the effect that as and when required, the exempted documents will be submitted," RBI says.
Further, to facilitate secondary market transactions, the central bank says, banks may share the KYC documents received from the FPI or certified copies received from a custodian or regulated intermediary with other banks or regulated market intermediaries based on written authorisation from the FPI.
While the provisions of this circular are applicable for both new and existing FPI clients, RBI clarifies that these provisions are applicable only for PIS by FPIs.