The Reserve Bank of India issued the Reserve Bank of India (Payments Banks – Know Your Customer) Directions, 2025 to enhance Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) safeguards within the payments bank ecosystem. These Directions, effective immediately, aim to prevent misuse of financial channels for money laundering and terrorist financing, aligning India with global standards set by the Financial Action Task Force (FATF). They draw authority from multiple statutes, including the Banking Regulation Act, FEMA, the Payment and Settlement Systems Act, and the Prevention of Money-Laundering Act and Rules. The framework mandates payments banks to implement robust customer identification procedures, monitor transactions, and ensure adherence across domestic operations as well as foreign branches and majority-owned subsidiaries, subject to host-country legal constraints. Where regulatory standards differ, the stricter norms must be followed, except in the case of “small accounts.” The Directions reinforce RBI’s commitment to financial integrity and systemic stability.
RESERVE BANK OF INDIA
RBI/DOR/2025-26/218
DOR.AML.REC.No.137/14.01.009/2025-26 | Dated: November 28, 2025
Reserve Bank of India (Payments Banks – Know Your Customer) Directions, 2025
Introduction
In order to prevent banks and other financial institutions from being used as a channel for Money Laundering (ML)/ Terrorist Financing (TF) and to ensure the integrity and stability of the financial system, efforts are continuously being made both internationally and nationally, by way of prescribing various rules and regulations. Internationally, the Financial Action Task Force (FATF), which is an intergovernmental body established in 1989 by the Ministers of its member jurisdictions, sets standards and promotes effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. India, as a member of FATF, is committed to upholding measures to protect the integrity of the international financial system.
In India, the Prevention of Money-Laundering Act, 2002, and the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005, form the legal framework on Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT). The provisions of the PML Act, 2002 and the PML Rules, 2005, as amended from time to time by the Government of India, require Regulated Entities (REs) to follow certain customer identification procedures while undertaking a transaction either by establishing an account-based relationship or otherwise, and to monitor their transactions.
Accordingly, in exercise of the powers conferred by sections 35A of the Banking Regulation Act, 1949, section 10(2) read with section 18 of Payment and Settlement Systems Act 2007 (Act 51 of 2007), section 11(1) of the Foreign Exchange Management Act (FEMA), 1999, Rule 9(14) of the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005, and all other laws enabling the Reserve Bank in this regard, the RBI being satisfied that it is necessary and expedient in the public interest so to do, hereby issues the Directions hereinafter specified.
Chapter I – Preliminary
A. Short Title and Commencement
1. These Directions shall be called the Reserve Bank of India (Payments Banks – Know Your Customer) Directions, 2025.
2. These Directions shall come into effect from the date of issue.
B. Applicability
3. These Directions shall be applicable to Payments Banks (hereinafter collectively referred to as ‘banks’ and individually as a ‘bank’).
4. These directions shall also apply to those branches and majority-owned subsidiaries of the bank which are located abroad, to the extent they are not contradictory to the local laws in the host country, provided that:
i. where applicable laws and regulations prohibit implementation of these guidelines, the bank shall bring the same to the notice of the RBI. The RBI may advise the bank to take further necessary action, including application of additional measures to manage the ML / TF risks.
ii. in case there is a variance in KYC / AML standards prescribed by the RBI
and the host country regulators, branches / subsidiaries of the bank shall adopt the more stringent regulation of the two.
Provided that this rule shall not apply to ‘small accounts’ referred to in paragraph 28 of Chapter VI.
Read Full text of the Notification: https://rbidocs.rbi.org.in/rdocs/notification/PDFs/218MD.pdf
