The Reserve Bank of India has issued the Urban Co-operative Banks – Know Your Customer (KYC) Directions, 2025 to strengthen safeguards against money laundering and terrorist financing and to protect the integrity of the financial system. Issued under multiple statutory powers, the Directions align domestic banking regulation with India’s commitments under international AML/CFT standards set by the Financial Action Task Force. The framework is rooted in the Prevention of Money-Laundering Act, 2002 and related rules, requiring regulated entities to follow robust customer identification, due diligence, and transaction monitoring procedures when establishing relationships or conducting transactions. Applicable to all Urban Co-operative Banks, defined as Primary Co-operative Banks under the Banking Regulation Act, the Directions come into force immediately upon issuance. By consolidating and updating KYC obligations, the RBI aims to ensure consistent compliance, enhance monitoring of suspicious activities, and reinforce public confidence in the co-operative banking sector while supporting the stability and credibility of India’s financial system.
RESERVE BANK OF INDIA
RBI/DOR/2025-26/291
DOR.AML.REC.No.210/14.01.006/2025-26 | Dated: November 28, 2025
Reserve Bank of India (Urban Co-operative 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, the Banking Regulation Act (AACS), 1949, read with section 56 of the Act ibid., 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, 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 (Urban Co-operative 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 Urban Co-operative Banks (hereinafter collectively referred to as ‘banks’ and individually as a ‘bank’).
In this context, Urban Co-operative Banks shall mean Primary Co-operative Banks as defined under section 5(ccv) read with Section 56 of Banking Regulation Act, 1949.
Read Full text of the Notification: https://rbidocs.rbi.org.in/rdocs/notification/PDFs/291MDE108E59AC43D4C13B2D06598B296C877.PDF
