NRIs living abroad can now complete KYC from home due to new SEBI rule

According to a new circular from SEBI, Non-Resident Indians (NRIs) will be able to complete the KYC (Know Your Customer) process for investments from abroad starting 3 December, as reported by Business Standard. Under this new change, individual non-residents will now be able to get their identity verified remotely, eliminating the need for them to travel to India to open an investment account. This facility will be available to Overseas Citizens of India (OCI) and foreign nationals residing in countries that comply with Financial Action Task Force (FATF) standards, in addition to NRIs. However, investors in countries that do not comply with FATF standards will have to follow the existing old process.

Until now, under the rules of SEBI's October 2023 KYC Master Circular, the physical presence of the investor in India was mandatory to conduct digital KYC. SEBI's new circular acknowledges that this restriction prevented foreign investors from completing the process digitally. Consequently, many NRIs were either waiting to visit India to open investment accounts or had to rely on a lengthy paper-based process.

Until now, investors had two options. The first was digital KYC, which was only possible when the investor was in India. According to Somnath Mukherjee, Vice President of Zerodha, e-signing was not permitted from any internet address outside India, even if the investor possessed a mobile number linked with Aadhaar or a digital signature. The second option was paper-based, which, according to brokers like Zerodha, was very tedious. Investors had to print application forms and collect documents such as PAN card, passport or OCI card, proof of foreign address, and cancelled cheques. Each of these documents had to be attested by a Notary Public, Indian Embassy, Consulate, or a foreign branch of an Indian bank. Subsequently, all these documents had to be sent to the broker in India via international courier, the cost of which had to be borne by the investor.

Zerodha founder Nithin Kamath had mentioned in a post in August that this process could take 2-3 weeks or even months. Somnath Mukherjee added that arranging all physical documents, filling in details correctly in the forms, getting them notarized, and sending them to India via courier was the most difficult task. For these very reasons, many NRIs were avoiding opening investment accounts or considered it a task to be completed during a visit to India. According to Prime Wealth CEO Alok Dubey, this delay also caused obstacles in financial planning, as many investors would abandon the process midway.

Under the new framework effective from 3 December, investors will be able to submit forms, upload scanned documents, and sign electronically without visiting India. However, this process will not be entirely paperless. If the investor submits a digital specimen signature, it will be necessary to take a 'wet signature' (a signature made with ink on paper) during a video call in the presence of a broker's official, as per the circular. Upon receiving the documents, the broker will conduct a live video-based identity verification process.

SEBI (Securities and Exchange Board of India) is India's regulatory body responsible for the management and regulation of the stock market and securities market. It protects the interests of investors and makes rules to bring transparency to the market.