SEBI’s Consultation Paper on Revamped KYC & KRA Framework: Detailed Analysis

Securities and Exchange Board of India, through a consultation paper dated January 16, 2026, has proposed a comprehensive re-design of the client KYC ecosystem in the securities market. The paper focuses on simplifying client on-boarding, reducing repetitive documentation, strengthening risk management at KYC Registration Agencies (KRAs), and ensuring continued alignment with PMLA and PML Rules.

Public comments have been invited on these proposals up to February 6, 2026.

This article provides a structured, practitioner-focused walkthrough of the key proposals, their regulatory background, and practical implications for intermediaries, KRAs and assessees.

Key Definitions and Regulatory Context

Before examining the proposals, SEBI has reiterated several core concepts:

  • PMLA: Refers to “The Prevention of Money Laundering Act, 2002” including all amendments.
  • Know Your Client (KYC): The formal process prescribed by SEBI for establishing and verifying Proof of Identity, Proof of Address and ensuring compliance with rules and circulars issued under the framework for prevention of money laundering.
  • KYC Registration Agency (KRA): A company incorporated under the Companies Act 2013, registered under the SEBI [KYC (Know Your Client) Registration Agency] Regulations, 2011, and treated as an “intermediary” under the SEBI Act 1992.
  • Client Due Diligence (CDD): As defined in Rule 2(1)(b) of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (PML Rules), it covers due diligence on a person engaged in a financial transaction or activity with a reporting entity, including any beneficial owner on whose behalf such person is acting.
  • Client Identification Process (CIP): A subset of CDD dealing specifically with verification of a client’s identity.
  • “Validated” KYC record: A KYC entry where the KRA has independently verified the data.
  • “Portable” KYC record: Once a KYC is validated, it becomes usable across intermediaries—subsequent intermediaries can retrieve the KYC from the KRA system without fresh data collection (currently applicable to CIP-related information).

Objective of the Consultation Paper

The primary intention is to solicit market feedback on proposed modifications to the KYC framework that aim to:

  • Simplify and standardise client on-boarding;
  • Rationalise and strengthen risk management practices at KRAs;
  • Leverage existing KRA infrastructure more effectively;
  • Reduce repeated KYC submissions by assessees;
  • Maintain full consistency with PMLA, PML Rules and the KRA Regulations.

Background: Existing KYC Framework & Need for Change

On October 12, 2023, SEBI issued a Master Circular on KYC norms for securities market intermediaries (SEBI/HO/MIRSD/SECFATF/P/CIR/2023/169), aligning KYC practices with the PML Rules and the KRA Regulations.

Following market inputs, SEBI identified several pain points:

  • Duplication of supplementary KYC information across intermediaries;
  • Operational challenges in periodic KYC updates and risk management;
  • Rigid documentation requirements in specific scenarios (e.g. OCI in India, name change);
  • Practical difficulties in address and contact validation.

A Working Group of industry stakeholders and Market Infrastructure Institutions was set up to examine these issues and suggest improvements. Based on its recommendations, SEBI has proposed amendments in the following broad areas:

  1. Central storage and sharing of supplementary KYC information at KRAs;
  2. Standardised Re-KYC timelines and sharing of updated KYC across intermediaries;
  3. Flexibility to capture alternate contact details and rationalised mobile verification;
  4. Time-bound delinking of KYC records on account closure;
  5. Relaxation of overseas address proof for OCI/PIO residing in India;
  6. Simplified process for recording name changes where PAN and Aadhaar are already updated;
  7. Rationalisation of source verification for current addresses.

Centralised Supplementary KYC Information at KRAs

Existing Architecture

KYC currently comprises:

  • Part I of Account Opening Form (AOF): CIP – core identification details and address proof; aligned to the CERSAI template.
  • Part II of AOF: CDD – additional due diligence data such as income range, occupation, education, place and country of birth etc.

Under the Master Circular:

  • KRAs verify and validate information uploaded by intermediaries (para 96).
  • Intermediaries can fetch validated records from KRAs (para 101).

However, CDD information is not standardised at the KRA level. As a result, assessees repeatedly disclose similar supplementary data to each intermediary.

Issues Identified

  • Supplementary CDD information is not centrally maintained or standardised.
  • Clients repeatedly provide the same details to multiple intermediaries.
  • Universal source validation of all such fields is often impractical for intermediaries/KRAs.

Proposed Framework

  1. Centralisation of Select CDD Fields
    Certain supplementary data from Part II of AOF, common across intermediaries, will be stored at the KRA and made shareable. Intermediaries must submit the following to KRAs: