RBI KYC Amendment 2026: FPI Document Rules Updated

What Happened?

The Reserve Bank of India issued the RBI (Small Finance Banks – Know Your Customer) Amendment Directions, 2026 on September 18, 2026, effective immediately. This amendment extends an important facility that was previously available only to Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) to now also cover Foreign Portfolio Investors (FPIs).

The key change: Small finance banks can now accept originally certified copies of identity documents from FPIs, certified by overseas authorities like notaries public, judges, Indian embassies, or overseas bank branches—instead of requiring fresh certifications by bank officials in India.

Background & Legal Context

This amendment operates under multiple legal frameworks important for your compliance:

• Prevention of Money Laundering Act, 2002 – The statutory foundation requiring robust KYC procedures
• Prevention of Money Laundering (Maintenance of Records) Rules, 2005 – Rule 9(14) specifically governs certified copy requirements
• Foreign Exchange Management Act, 1999 – Section 11(1) governs FPI activities and document requirements
• Banking Regulation Act, 1949 – Sections 35A and 56 give RBI power to issue these directions
• Payment and Settlement Systems Act, 2007 – Section 10(2) and 18 ensure banking system integrity
• FEMA Deposit Regulations, 2016 – Defines NRIs and PIOs (now also applies concept to FPIs)

The original RBI (Small Finance Banks – Know Your Customer) Directions, 2025 issued on November 28, 2025 contained paragraph 5(1)(v) which already allowed NRIs and PIOs to submit certified copies from authorized authorities abroad. The 2026 amendment simply extends this same facility to FPIs—no stricter rules, just expanded access.

While this is primarily an RBI/banking regulation matter, it has indirect income tax implications for Indian residents and NRIs engaged in financial reporting and investment disclosure under the Income Tax Act, 2025, particularly sections relating to foreign income and asset reporting.

What Does This Mean for You?

For Foreign Portfolio Investors (FPIs):

• Easier Account Opening: You no longer need to arrange for document certification by a bank official in India. You can get your proof of identity and address documents certified by any of these authorities in your home country: Notary Public, Court Magistrate, Judge, or Indian Embassy/Consulate.
• Reduced Procedural Burden: No need to visit India or arrange through Indian intermediaries just for document certification. This significantly speeds up the KYC process for FPIs wanting to invest in India through small finance banks.
• Five Accepted Certification Sources: Your documents can be certified by:
  • Authorized officials of overseas branches of Scheduled Commercial Banks registered in India
  • Branches of overseas banks with which Indian banks have relationships
  • Notary Public abroad
  • Court Magistrate in your country
  • Judge in your country
  • Indian Embassy or Consulate General where you reside

For Small Finance Banks:

• Enhanced Compliance Flexibility: Banks can now accept certified documents without having to re-certify them in India, provided the original certification comes from these recognized authorities. This reduces administrative workload.
• Clear Audit Trail: Banks must still record the comparison on the document copy as per the Act—the certification source just changes, not the bank's internal documentation requirements.
• Risk Mitigation: By accepting certifications from established authorities (judges, embassies, notaries), banks have greater confidence in document authenticity while reducing forgery risks.

For Indian Income Tax Assessees:

• Relevant for NRI Tax Compliance: If you are an NRI or PIO planning to open accounts in small finance banks in India (for receiving remittances, maintaining deposits, or other financial needs), this amendment makes it easier. Faster account opening means you can complete your financial arrangements and properly report them in your Income Tax return for AY 2026-27 onwards.
• Investment Disclosure: If you are a resident Indian who has FPI status through overseas registration, you may benefit from streamlined KYC, affecting how quickly you can complete financial disclosures under section 139 (Income Tax filing requirements).

What Should You Do Now?

If you are an FPI:

• Contact small finance banks in India where you wish to open accounts and inquire about their updated KYC procedures under the new Amendment Directions 2026
• Prepare certified copies of your identity and address proof documents from any of the six recognized authorities listed above—you no longer need to wait for an Indian bank official
• Ensure the certification explicitly states that the official has compared the copy with the original document and verified its authenticity
• Keep the certification date recent (most banks prefer certifications not older than 3-6 months)
• If using Indian Embassy/Consulate certification, book an appointment well in advance as this can take time

If you are a Small Finance Bank:

• Update your KYC procedures and compliance documentation to reflect the expanded facility for FPIs as of September 18, 2026
• Train your relationship managers and compliance teams on the new approved certification sources
• Modify your system notes and customer onboarding forms to accept these alternative certifications without requesting re-certification
• Ensure your audit and compliance teams understand that the original certified copy must still be compared and documented as per banking norms—the change only affects the source of initial certification
• Update your customer communication materials and website to reflect this facility

If you are an NRI/PIO:

• This amendment doesn't change your existing rights, but confirms they are now standardized across NRIs, PIOs, and FPIs
• Continue using the same certified copy process as before—no new action needed

For Income Tax Reporting (AY 2026-27 onwards):

• If the faster KYC process helps you complete financial arrangements in India, ensure these are properly disclosed in your ITR (Income Tax Return) under relevant schedules
• For NRIs: Report foreign assets and income under Schedule FA and Schedule FSI respectively
• For residents with foreign investments: Use Schedule EI (Foreign Equities) if investing through FPI route

Key Takeaways

• FPIs Get Equal Treatment: The RBI has extended the document certification convenience previously available only to NRIs and PIOs to Foreign Portfolio Investors effective immediately (September 18, 2026).
• Six Recognized Certification Sources: Overseas bank branches, notaries public, magistrates, judges, and Indian embassies/consulates can now certify FPI identity and address documents instead of requiring Indian bank re-certification.
• Faster Account Opening: This change significantly reduces procedural delays for FPIs wanting to open accounts in small finance banks, supporting India's foreign investment objectives.
• Compliance Remains Unchanged: The core KYC and anti-money laundering requirements under Prevention of Money Laundering Act, 2002 remain the same—only the certification source changes.
• Indirect Tax Impact: While primarily a banking regulation update, this facilitates smoother financial account opening which supports proper income tax compliance and reporting under sections of the Income Tax Act, 2025 for foreign investors and NRIs.

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