RBI Governor Says 'We Must Be Mindful Of Customer Rights, Avoid Repeating KYC Process'

94 per cent of adults now have a bank account, however, governor Sanjay Malhotra cautioned that regulatory policies should not create unnecessary obstacles.

Malhotra acknowledged it has helped improve the ease of doing business but also cautioned against its misuse for illicit financial activities.

Source : PTI

Reserve Bank of India (RBI) Governor Sanjay Malhotra on Wednesday emphasised the need for regulatory frameworks that do not inadvertently obstruct financial inclusion.

Addressing a Financial Action Task Force (FATF) event in Mumbai, he highlighted the importance of ensuring that compliance measures do not burden legitimate economic activities, reported PTI.

India has witnessed significant progress in financial inclusion, with 94 per cent of adults now having a bank account, the governor said. However, Malhotra cautioned that regulatory policies should not create unnecessary obstacles. “It must be ensured that regulations do not create unintended barriers to financial inclusion. We need to be mindful of customer rights and convenience while fulfilling the due diligence requirements,” he said.

Striking a Balance Between Security and Accessibility

While reinforcing the importance of securing financial systems against money laundering and terrorist financing, Malhotra stressed the need for a balanced approach. “The laws and regulations have to target only the illegitimate and the illicit with surgical precision and not be blunt tools which unintentionally end up hurting the honest,” he remarked. He warned against excessive regulatory zeal that could stifle legitimate investments and activities.

To ensure effective and fair financial regulations, Malhotra advocated for a risk-based approach. He noted that assessing the impact of regulations on businesses and individuals is crucial. Additionally, he called for better coordination among stakeholders to prevent redundant Know Your Customer (KYC) processes.

Leveraging Technology While Mitigating Risks

Speaking on the role of technology, Malhotra acknowledged it has helped improve the ease of doing business but also cautioned against its misuse for illicit financial activities. “We are determined to further strengthen our financial system to deter and combat illicit financial activities,” he said.

Malhotra also underscored the significance of the discussions at the three-day seminar in aiding the implementation of India’s new privacy law. He further suggested making the travel rule—requiring financial institutions and Virtual Asset Service Providers (VASPs) to share details of financial transactions—technology-neutral for seamless global adoption.