Central bank of india

RBI reminds banks of their know your customer responsibilities

India’s banks must finish updating their know your customer (KYC) due diligence for all customers with active accounts by June 2023, the Reserve Bank of India (RBI) has said.

It added that it was investigating active accounts with sizeable balances where banks have not updated their KYC details, according to a report in the Economic Times. The exercise is aimed at identifying any risks associated with these accounts.

The RBI said trusts, associations, societies and clubs are also being monitored, along with high-net-worth individuals (HNIs). An RBI official said it was putting the spotlight on the whole KYC issue after transactions from a few accounts were examined and it was found that their KYC was not updated.

The official added that the RBI had stopped lenders from freezing non-KYC compliant accounts until March 2022, due to Covid-19. However, some of these accounts have failed to update their KYC even after repeated requests.

Another bank executive stated that it is still not clear whether lenders can partially freeze these accounts on their own. “We will now ask the RBI for clarification on the subject and whether banks can have a board-approved policy for freezing such accounts where KYC updates have been pending,” he said.

In her FY24 Budget speech, Finance Minister Nirmala Sitharaman suggested that the KYC process could be made simpler by switching from the current ‘one-size-fits-all’ method to a ‘risk-based’ approach.

Financial sector regulators will also be encouraged to have a KYC system fully capable of addressing the needs of ‘Digital India’, the finance minister had said.

A further strengthening of the central KYC format is being discussed by banks and the regulator in order to prevent multiple accounts in the banking system with different identifications.

 

US-India trade on the rise

The United States has emerged as India’s biggest trading partner in 2022-23, according to provisional figures from India’s Commerce Ministry.

It said bilateral trade between India and the US has increased by 7.65% to $128.55bn in 2022-23, compared with $119.5bn in 2021-22. It was $80.51bn in 2020-21.

Exports to the US rose by 2.81% to $78.31bn in 2022-23, up from $76.1bn in 2021-22, while imports grew by about 16% to $50.24bn, according to the ministry’s data.

However, during 2022-23 India’s bilateral trade with China fell by 1.5% to $113.83bn – it was $115.42bn in 2021-22.

Experts are predicting that bilateral trade between the US and India will continue to grow in the coming years, with both governments committed to strengthening the economic ties.

Federation of Indian Export Organisations (FIEO) President A. Sakthivel said that increasing exports of goods such as pharmaceutical, engineering and gems and jewellery is helping India to boost exports to the US.

FIEO Vice President Khalid Khan said global firms are diversifying business into countries like India. “The bilateral trade between India and the US will continue to grow as our exporters are getting good orders from that country,” he said.

Rakesh Mohan Joshi, Director of the Indian Institute of Plantation Management (IIPM), Bangalore, said that India provides huge trade opportunities for the US, as India is the world’s third-largest consumer market and the fastest-growing market economy.

“Major export items from India to the US include petroleum, polished diamonds, pharmaceutical products, jewellery, light oils and petroleum, whereas major imports from the US include petroleum, rough diamonds, liquified natural gas, gold, coal, waste and scrap,” he said.

The United States is one of the few countries with which India has a trade surplus. In 2022-23 that trade surplus was $28bn.

The data showed that China was India’s top trading partner since 2013-14 until 2017-18 and also in 2020-21. Before China, the UAE was the country’s largest trading partner.

In 2022-23, the UAE with $76.16bn, was the third-largest trading partner of India. It was followed by Saudi Arabia ($52.72bn) and Singapore ($35.55bn).