SEBI eases NRI KYC rules: Will a fully digital route boost investments in India?

“Digital KYC and onboarding will reduce friction for retail NRI investors who earlier shunned India investing due to logistics,” Vikram Shah, CEO and Founder of Vested Finance, said.

Shah welcomed SEBI’s move, saying the proposal should open the door for retail investor NRIs, who can invest in lower ticket sizes as small as $5,000.

Earlier this month, SEBI released a consultation paper, “Review of Know Your Client Process for Individual Persons Resident Outside India” and proposed the relaxation for individual Persons Resident Outside India, including NRIs, Overseas Citizens of India (OCIs) and foreign nationals living abroad, in countries compliant with the Financial Action Task Force (FATF).

SEBI said the current requirement for digital onboarding poses a hurdle because intermediaries must capture the client’s latitude and longitude within India. The proposed relaxation aims to remove this requirement for eligible investors located overseas.

How does the current process work?

At present, an NRI seeking to open an account digitally needs to be physically present in India. For those living abroad, the process involves physical documentation and international courier services, which can add significant delays.

“Indeed, the current practice of geo-tagging at the stage of digital KYC creates some inconvenience for NRIs and other eligible overseas investors, who are usually required to come to India and provide additional documents,” CA Kinjal Shah, President, Bombay Chartered Accountants’ Society (BCAS), said, welcoming SEBI’s proposal to simplify the digital onboarding process for overseas investors.

What changes under the new system?

Now, under the new proposal, eligible overseas investors would be able to complete KYC digitally from their country of residence.

Speaking of its advantages, Kinjal Shah says, “the main one is obvious: efficiency. Paperless processing may simplify the process of KYC documentation and verification. Video-based onboarding and verification across entities would make it easier for investors from FATF compliant jurisdiction.”

“Nevertheless, intermediaries will have to preserve a proper audit trail and ensure proper classification of the investors.”

But will it really boost NRI participation?

Digital KYC and onboarding could reduce friction for retail NRI investors who previously shunned investing in India due to logistical and documentation challenges.

However, the recent relative underperformance of Indian markets, coupled with the depreciation of the rupee, could still be a key factor influencing whether NRIs choose to invest in India through a fully digital route.