SEBI eases onboarding norms for overseas individual investors, allows digital KYC without physical presence

The revised framework, announced through a circular issued by the market regulator, aims to simplify the process of onboarding Persons Resident Outside India (PROIs), including Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs) and foreign nationals.

Under the revised norms, individual investors residing in countries compliant with Financial Action Task Force (FATF) standards will be permitted to complete their KYC process digitally. The new provisions will come into effect from December 3.

In order to ease the process of on-boarding of an individual Person Resident Outside India (PROI) client, it has been decided to review the existing provisions governing the KYC process. Individual PROI client shall mean Non-Resident Indian (NRI), Overseas Citizen of India (OCI) or foreign national, the SEBI circular stated.

As part of the relaxation, custodian banks and stockbrokers will be allowed to accept KYC information and supporting documents digitally from eligible overseas individual investors, reducing the need for physical documentation and in-person verification.

The regulator has also permitted intermediaries to rely on KYC verification already completed by another SEBI-registered intermediary or an entity regulated by other financial-sector regulators, based on records available in the central KYC registry.

However, SEBI has retained the responsibility of ensuring adequate due diligence with the concerned intermediary.

The intermediary shall have the ultimate responsibility for the KYC of its clients, including undertaking enhanced due diligence appropriate to the risk profile of the clients, the circular stated.

Further, where physical verification is not feasible, intermediaries will be permitted to complete the verification process through video-based methods.

The revised framework will also extend to the re-KYC process for eligible individual clients residing outside India, providing greater flexibility for existing overseas investors to maintain their KYC records.

However, the relaxation will not extend to all categories of foreign investors. Foreign nationals seeking to invest in Indian markets through the Foreign Portfolio Investor (FPI) route will continue to be governed by SEBI's existing FPI framework.

Similarly, individuals residing in countries that do not comply with FATF standards will continue to follow the existing KYC requirements.

The regulator has also clarified that KYC verification completed before the revised provisions come into force will continue to be governed by the earlier guidelines, indicating that the new framework will not have retrospective application.

The circular further recognises the Reserve Bank of India (RBI), Insurance Regulatory and Development Authority of India (IRDAI), Pension Fund Regulatory and Development Authority (PFRDA) and International Financial Services Centres Authority (IFSCA) as financial-sector regulators for the relevant KYC provisions.

The move is expected to make market access more convenient for eligible overseas individual investors by reducing procedural requirements and enabling a more streamlined digital onboarding process. (ANI)