Periodic Re-KYC for Business Bank Accounts: What Banks Ask For and How to Avoid a Restricted Account

KYC doesn't end when a business bank account is opened. Under the RBI's KYC rules, banks have to update the KYC of their customers from time to time, including businesses. When a re-KYC request is missed, the bank can restrict operations on the account until it's updated, which can stop salaries and supplier payments at the worst moment. This guide explains what's involved and how to stay ahead of it.

How Often Re-KYC Is Due

Banks classify customers by risk, and the frequency of periodic KYC updation depends on it. Under the RBI's KYC directions, it's at least:

• Every 2 years for high-risk customers.
• Every 8 years for medium-risk customers.
• Every 10 years for low-risk customers.

Banks can ask more often, and will usually also ask when something changes, such as the entity's name, address, ownership or signatories. They notify customers in advance, usually by email, SMS or letter.

What Banks Ask For

For a business account, re-KYC usually covers:

• The entity: its PAN, certificate of incorporation or registration, and any changes to its constitution, such as the memorandum and articles, LLP agreement or partnership deed.
• The address: current proof of the registered or business address.
• Authorised signatories: an up-to-date resolution, and KYC of each signatory.
• Beneficial owners: details and KYC of the individuals who ultimately own or control the entity.
• Business details: the nature of business and expected transactions, which help the bank's risk assessment.

If nothing has changed, some banks accept a self-declaration for parts of the update, but expect documents for anything that has changed.

Beneficial Owners

Banks must identify the individuals who ultimately own or control a business. For a company, that's generally anyone holding more than 10% of the shares or profits, or exercising control in other ways. Where ownership runs through other entities, the bank looks through them to the individuals at the top. Keep a current shareholding chart, so this part of re-KYC is quick and consistent with your MCA filings.

What Happens If You Miss It

If re-KYC isn't completed after the bank's notices, the bank can restrict operations on the account, for example blocking debits, until the KYC is updated. Restrictions are usually lifted once the documents are submitted and verified, but that can take days, which can disrupt payroll, supplier payments and tax payments.

Keeping the Bank Updated

Don't wait for the periodic request when something changes. Tell the bank promptly when:

• The entity's name or registered office changes.
• Directors, partners, trustees or signatories change.
• Ownership changes, especially if it affects beneficial owners.
• The nature of the business changes significantly.

Practical Tips

• Use an official, monitored email address and phone number on the account, so bank notices aren't missed.
• Keep a KYC pack ready: current entity documents, resolutions, signatory and beneficial owner KYC.
• Make sure details match across the bank, MCA, GST and income tax records.
• Respond to the bank's request well before the deadline.

Getting Help

Think Filing prepares KYC packs for business accounts, keeps signatory and beneficial owner details current, and handles re-KYC requests before they become a problem.

Sources

• RBI Master Direction on Know Your Customer.
• Prevention of Money-laundering (Maintenance of Records) Rules, 2005.