SEBI Eases KYC Norms for NRIs, OCIs and Foreign Nationals 2026

Introduction

To address this issue, the Securities and Exchange Board of India (SEBI) has relaxed KYC norms for NRIs, OCIs and foreign nationals residing in Financial Action Task Force (FATF)-compliant countries. Under the revised framework, eligible overseas investors can submit their KYC details and supporting documents digitally to SEBI-registered intermediaries without being physically present in India. The decision is expected to simplify the investment process, reduce repetitive documentation, improve ease of doing business and encourage greater participation of overseas investors in India’s securities markets.

Why is SEBI in the News?

SEBI has eased the Know Your Customer (KYC) requirements for individual Persons Resident Outside India (PROIs), including:

• Non-Resident Indians (NRIs).
• Overseas Citizens of India (OCIs).
• Foreign nationals.

• Earlier, overseas investors faced difficulties completing digital KYC because the existing framework required them to be physically present in India during the digital onboarding process.
• This created additional compliance requirements for individuals living abroad who wanted to invest in Indian securities markets.
• Under the revised framework, eligible individuals residing in FATF-compliant countries can complete the digital onboarding process from overseas.

Key Highlights of the SEBI Decision

What is KYC (Know Your Customer)?

Know Your Customer (KYC) is a verification process used by financial institutions and regulated intermediaries to establish the identity and address of their customers before providing financial services.

KYC is an important part of India’s financial regulatory system because it helps prevent:

1. Money laundering.
2. Terrorist financing.
3. Identity theft.
4. Financial fraud.
5. Misuse of financial accounts.
6. Unauthorised financial transactions.

Who carries out KYC in the Indian securities market?

KYC is generally completed through SEBI-registered intermediaries, including:

• Stockbrokers.
• Depository Participants (DPs).
• Other eligible securities market intermediaries.

These intermediaries verify the investor’s identity, address and other required information before opening or servicing an investment account.

Why is KYC important?

KYC ensures transparency and accountability in financial transactions. It also helps regulators and financial institutions identify suspicious activities and maintain the integrity of the financial system.

What Changes Has SEBI Introduced in the KYC Framework?

SEBI has introduced changes to make the KYC process easier for overseas investors while maintaining appropriate regulatory safeguards.

A. Digital KYC Onboarding from Overseas

• This is the most important change introduced by SEBI.
• Earlier, the existing framework required the client to be physically present in India during digital KYC.
• This made it difficult for NRIs, OCIs and foreign nationals living abroad to complete their onboarding remotely.

Under the revised framework:

• Eligible overseas investors can complete digital KYC from abroad.
• They can submit KYC information electronically.
• Supporting documents can be submitted digitally.
• Physical presence in India is no longer mandatory during digital onboarding for eligible individuals residing in FATF-compliant countries.

This will make the process more convenient for overseas investors who want to participate in Indian securities markets.

B. Greater Portability of KYC Records

• Another important change relates to the portability of KYC records.
• Earlier, investors could face repeated documentation and verification requirements when moving from one financial intermediary to another.
• The revised framework strengthens the portability of KYC records.

Under the revised provisions:

• KYC Registration Agencies (KRAs) can identify and mark individual KYC attributes as validated when verified against official or source databases.
• KYC records can be shared with other intermediaries.
• Records can remain portable even if every individual attribute has not been validated.
• Intermediaries can rely on eligible KYC records available through KRAs or the Central KYC Records Registry (CKYCRR).

This will help reduce duplication of documentation and make the investment process more efficient.

C. Reuse of Existing KYC Information

• SEBI has also permitted intermediaries to rely on KYC completed by another SEBI-registered intermediary or an entity regulated by another financial sector regulator, subject to prescribed conditions and availability of records.
• This means investors may not need to repeat the entire verification process every time they open an account with another eligible intermediary.
• However, the intermediary onboarding the investor will continue to remain responsible for ensuring compliance with KYC requirements and conducting enhanced due diligence wherever necessary.

Why Has SEBI Restricted the Relaxation to FATF-Compliant Countries?

SEBI has made the new digital onboarding facility available to overseas individuals residing in countries compliant with the standards of the Financial Action Task Force (FATF). The restriction is intended to ensure that overseas investors are subject to appropriate anti-money laundering and counter-terrorist financing safeguards in their country of residence.

What is the reason behind this condition?

• Financial markets can be misused for activities such as money laundering, terrorist financing and other financial crimes.
• If overseas investors are allowed to complete KYC without appropriate verification, it may increase the risk of identity fraud and misuse of financial accounts.
• FATF establishes international standards to address these risks.

By linking the relaxation to FATF-compliant jurisdictions, SEBI aims to balance two objectives:

1. Making Indian securities markets more accessible to overseas investors.
2. Maintaining adequate safeguards against financial crimes.

Important: The eligibility condition is based on the applicable FATF-compliance requirement, not simply whether a country is a FATF member.

What Documents Are Required for KYC Under the Revised Framework?

• Although SEBI has simplified the onboarding process, overseas investors are still required to provide appropriate identity and address documents.
• The revised framework provides for the collection and verification of documents through permitted electronic and other modes.

Important documents include:

• For foreign nationals whose officially valid identity documents do not contain address details, prescribed alternative documents may be used as address proof.
• These may include documents issued by a government department in the foreign jurisdiction or a letter from a foreign embassy or mission in India, subject to applicable requirements.
• The framework also permits specified electronic documents and verification methods where physical production of original documents is not feasible.

What is Video In-Person Verification (VIPV)?

• Video In-Person Verification (VIPV) is a technology-based method through which a financial intermediary verifies a customer’s identity through a live video interaction.
• It is particularly useful for overseas investors who cannot visit an intermediary’s office in India for physical verification.
• Under the revised SEBI framework, video-based verification can be used where physical in-person verification is not feasible.

Important Safeguards Under VIPV

SEBI has prescribed safeguards to ensure that the verification process remains reliable.

1. Live Video Verification: The investor’s identity is verified through a live video interaction.
2. Authorised Official: An authorised official of the intermediary must be present during the verification process.
3. Geo-tagging: Location-related information is captured as prescribed.
4. Face Liveness Checks: These help establish that the person is physically present and not using a static photograph or pre-recorded video.
5. End-to-End Encryption: This helps protect the information transmitted during the verification process.
6. Concurrent Audit: The video verification process is subject to concurrent audit to strengthen regulatory oversight.

The purpose is to make remote onboarding easier without compromising the reliability of identity verification.

What is FATF (Financial Action Task Force)?

The Financial Action Task Force (FATF) is an international intergovernmental organisation that establishes global standards to combat money laundering, terrorist financing and other threats to the international financial system.

It plays an important role in strengthening the integrity and transparency of financial systems across countries.

Key Facts About FATF

Major Functions of FATF

1. Combating Money Laundering

FATF establishes international standards to prevent criminals from using financial institutions to convert illegally obtained money into legitimate assets.

2. Preventing Terrorist Financing

It develops measures to prevent the collection, movement and use of funds for terrorist activities.

3. Developing International Standards

FATF issues recommendations that countries are expected to implement through their domestic legal and regulatory frameworks.

4. Monitoring Countries

It evaluates how effectively countries implement its recommendations through mutual evaluations and follow-up processes.

5. Promoting International Cooperation

FATF encourages cooperation between governments, regulators, financial institutions and law enforcement agencies to tackle financial crimes.

FATF Membership

FATF has 40 members, comprising:

• 38 jurisdictions.
• European Commission.
• Gulf Cooperation Council (GCC).

India is a full member of FATF.What are the FATF 40 Recommendations?

The FATF 40 Recommendations are a set of international standards designed to help countries develop effective systems to prevent money laundering, terrorist financing and proliferation financing.

These recommendations provide a framework for governments to strengthen their financial and regulatory systems.

They cover several important areas:

• Assessment of money laundering and terrorist financing risks.
• Customer due diligence.
• Financial institution supervision.
• Reporting of suspicious transactions.
• Transparency of beneficial ownership.
• International cooperation.
• Asset recovery and confiscation.
• Regulation of financial activities.

Countries are evaluated on their implementation of these standards.

The FATF Recommendations are not a uniform domestic law. Countries implement them through their own legal and regulatory frameworks.

Significance of SEBI's Decision for the Indian Economy

The relaxation of KYC norms is important for India’s financial markets because it can improve access to domestic investment opportunities for overseas individuals.

A. Encouraging Overseas Investment

The simplified onboarding process can encourage more NRIs, OCIs and eligible foreign nationals to participate in India’s securities markets.

B. Improving Ease of Doing Business

Digital KYC reduces the need for physical visits and repetitive documentation, making the investment process more convenient.

C. Strengthening India’s Capital Markets

Greater participation by overseas investors can contribute to the depth and development of Indian capital markets.

D. Reducing Compliance Burden

The portability of KYC records can reduce repeated verification and documentation requirements for investors dealing with multiple intermediaries.

E. Promoting Digital Financial Services

The move supports India’s broader digitalisation of financial services and encourages technology-based regulatory compliance.

F. Strengthening Financial Transparency

The continued requirement for identity verification, due diligence and audit safeguards helps maintain confidence in the securities market.

G. Improving India’s Global Investment Appeal

A simpler and more accessible investment framework can improve India’s attractiveness as an investment destination for the overseas Indian community and eligible international investors.

Challenges and Risks Associated with Digital KYC

Although the revised framework is expected to simplify investor onboarding, certain challenges remain.

1. Identity Fraud: Digital onboarding may create risks of impersonation, forged documents and identity theft if verification is not properly conducted.

2. Cybersecurity Threats: Sensitive personal and financial information submitted digitally may be exposed to cyberattacks or data breaches.

3. Cross-Border Regulatory Differences: Countries have different legal and regulatory systems. Ensuring consistent verification across jurisdictions can be challenging.

4. Money Laundering Risks: Financial institutions must continue to identify suspicious transactions and conduct enhanced due diligence wherever necessary.

5. Technology Dependence: Investors may face difficulties due to poor internet connectivity, technical failures or limitations in digital verification systems.

6. Regulatory Compliance: SEBI-registered intermediaries must ensure that their digital infrastructure and verification procedures comply with applicable regulatory requirements.

7. Data Privacy: Personal information collected during KYC must be protected through appropriate security and data-handling practices.

Way Forward

To ensure that the relaxation achieves its intended objectives, SEBI and market intermediaries need to maintain a balance between investor convenience and financial security.

The following measures can strengthen the framework:

• Strengthen Digital Verification: Use reliable identity verification technologies and secure authentication mechanisms.
• Improve Cybersecurity: Protect investor information through encryption, access controls and regular security audits.
• Promote KYC Interoperability: Improve coordination among KRAs, intermediaries and the Central KYC Records Registry.
• Maintain Risk-Based Due Diligence: Apply enhanced checks to customers and transactions that present higher risks.
• Improve Investor Awareness: Educate overseas investors about the revised KYC process and applicable documentation.
• Strengthen International Cooperation: Encourage cooperation with foreign regulators and relevant authorities to address cross-border financial crimes.
• Ensure Regulatory Monitoring: Conduct regular audits and monitor intermediaries to ensure compliance with SEBI’s guidelines.

The ultimate objective should be to create an investor-friendly financial system without weakening safeguards against financial crime.

Frequently Asked Questions (FAQs)

Q1. Why has SEBI relaxed KYC norms for NRIs and OCIs?

SEBI has relaxed KYC norms to make it easier for NRIs, OCIs and foreign nationals to invest in Indian securities markets by allowing eligible individuals to complete digital onboarding from overseas.

Q2. Who can benefit from the revised KYC framework?

Non-Resident Indians, Overseas Citizens of India and foreign nationals residing in FATF-compliant countries can benefit from the revised provisions.

Q3. When will the revised SEBI KYC framework become effective?

The revised framework will come into effect on 3 December 2026.

Q4. What is the main change introduced by SEBI?

The main change is the removal of the requirement for eligible overseas investors to be physically present in India during digital KYC onboarding.

Q5. What is FATF?

The Financial Action Task Force is an international intergovernmental organisation established in 1989 to develop standards and promote measures against money laundering and terrorist financing.

Q6. What is the role of KYC Registration Agencies (KRAs)?

KRAs maintain and validate KYC records of investors and facilitate the sharing of these records with eligible market intermediaries.

Q7. What is Video In-Person Verification (VIPV)?

VIPV is a technology-based identity verification process that allows financial intermediaries to verify customers through a live video interaction, subject to prescribed safeguards.

Q8. Does the relaxation mean that SEBI has removed KYC requirements?

No. SEBI has simplified the onboarding procedure but has retained identity verification, documentation, due diligence and other regulatory safeguards.

Q9. What is the main objective of FATF's 40 Recommendations?

The recommendations provide international standards for combating money laundering, terrorist financing and proliferation financing.

Conclusion

SEBI’s decision to relax KYC norms for NRIs, OCIs and foreign nationals is an important step towards making India’s securities markets more accessible to overseas investors. By allowing eligible individuals to complete digital onboarding from abroad, SEBI has addressed a major procedural difficulty that previously restricted remote participation in Indian financial markets.

The introduction of portable KYC records and simplified verification procedures can further reduce repetitive documentation and improve the overall investor experience. At the same time, the FATF-compliance condition and continued due diligence requirements demonstrate that investor convenience must go hand in hand with financial security.

Overall, the revised framework reflects India’s efforts to develop a more accessible, technology-driven, transparent and globally connected financial market while maintaining strong safeguards against money laundering and financial fraud.