The Securities and Exchange Board of India (SEBI) is developing a new system to allow Non-Resident Indians (NRIs) to complete their Know Your Customer (KYC) verification remotely. This initiative aims to remove a significant barrier for millions of overseas Indians, making it easier for them to invest in the country's growing securities market without traveling back to India for paperwork.
According to SEBI Chairperson Tuhin Kanta Pandey, the regulator is working closely with other key agencies to launch a secure, paperless verification process. The project is currently in its testing phase and is considered a high-priority goal for the regulatory body.
Key Takeaways
- SEBI is creating a secure, remote KYC verification system for Non-Resident Indians (NRIs).
- The new process will eliminate the need for NRIs to be physically present in India for investment paperwork.
- This initiative is expected to unlock significant investment potential from the global Indian diaspora.
- The system is being developed in collaboration with the UIDAI (Aadhaar) and the Reserve Bank of India (RBI).
- SEBI is also strengthening its technological infrastructure, including using AI for market surveillance.
Removing a Major Hurdle for Overseas Investors
For years, the requirement for in-person verification and cumbersome documentation has been a major challenge for NRIs wanting to invest directly in Indian equities, mutual funds, and other financial products. The current process often involves multiple checks and physical submission of documents, discouraging many potential investors.
SEBI Chairperson Tuhin Kanta Pandey addressed this issue at the BFF Capital Market Confluence 2025 in Mumbai, stating that simplifying NRI access is a top priority.
"We are yet to establish an easy and secure KYC access for NRIs to facilitate their participation in the securities market. This will be an urgent goal for us," Pandey stated.
The proposed system will allow for digital identity verification, leveraging India's existing digital infrastructure. This move is part of a broader push by SEBI to widen market participation while upholding strict security and compliance standards. Pandey confirmed that the system is already undergoing testing and described it as a "major development once operational."
Collaboration and Technology at the Core
To bring this digital KYC system to life, SEBI is not working in isolation. The regulator is in advanced discussions with two critical government bodies: the Unique Identification Authority of India (UIDAI), which manages the Aadhaar biometric identity system, and the Reserve Bank of India (RBI), the country's central bank.
This collaboration is essential for creating a process that is both seamless for the user and secure enough to meet regulatory requirements. The goal is to build a robust framework that can reliably verify the identity of investors located anywhere in the world.
Why is KYC Important?
Know Your Customer (KYC) is a mandatory process used by financial institutions to verify the identity and address of their clients. It is a critical measure to prevent money laundering, terrorism financing, and other illicit financial activities. For investors, completing KYC is the first step required before they can buy or sell securities.
Tapping into Untapped Potential
Despite India's booming stock market, investment from the NRI community has remained below its potential. By making the onboarding process simpler and entirely digital, SEBI aims to attract a new wave of investment from millions of Indians living abroad, including those in the UAE, USA, and other global hubs.
Pandey also highlighted the need for greater financial literacy within India. A recent survey revealed some telling statistics about market participation.
Investor Awareness in India
- 63% of Indian households are aware of securities products.
- However, only 9.5% of households actively invest in them.
- In urban areas, the investment rate is higher at 15%, while it drops to just 6% in rural regions.
- Only 36% of investors report having a strong understanding of market products.
These figures underscore the importance of SEBI's dual focus: simplifying access for those who are ready to invest and expanding education for those who are not yet participating.
Strengthening Market Integrity and Security
Alongside efforts to increase participation, SEBI is heavily invested in bolstering the technological resilience of India's financial markets. Pandey noted the immense scale of daily operations, with stock exchanges handling over 1,600 crore messages on a typical day and up to 2,900 crore on peak days.
To protect this vast ecosystem, SEBI has implemented a comprehensive cybersecurity framework. This includes conducting live recovery drills to stress-test market institutions and ensure they can withstand potential disruptions.
"An attack on a single institution can destabilise the ecosystem. Our systems must remain secure and resilient," Pandey emphasized.
Data-Driven Surveillance and AI
SEBI is shifting from a reactive to a predictive approach in its supervisory role. The regulator is now using artificial intelligence (AI) and advanced data analytics to monitor market activity. This technology helps identify fraudulent patterns, such as "pump-and-dump" schemes, before they can cause widespread harm to investors.
The regulator has also revamped its data warehouse to support this predictive oversight, marking a significant technological upgrade in its surveillance capabilities.
Broader Digital Reforms by SEBI
The remote KYC for NRIs is one of several digital initiatives SEBI has undertaken to modernize India's capital markets. Over the past five years, these efforts have helped increase the number of investors to 134 million. Other key reforms include:
- T+1 Settlement: India has moved to a one-day settlement cycle, making it one of the fastest in the world and increasing market efficiency.
- UPI-ASBA Integration: The use of UPI for secondary market payments has been expanded, making transactions faster and safer for retail investors.
- Unified Investor App: A new application is being developed to give investors a single point of access to their holdings, transaction history, and other important information.
- Investor Risk Reduction Access Platform: This platform is designed to protect traders in the event of a broker default or technical glitch.
For global institutional funds, SEBI is also working to simplify the Foreign Portfolio Investor (FPI) registration process. Pandey used an analogy to describe its importance, stating, "FPI registration is a window to the world. If the window itself has cobwebs, it won’t shine in its glory."
Ultimately, these combined efforts signal a clear strategy: to use technology to make Indian markets more accessible, transparent, and secure for both domestic and international investors. Pandey concluded, "The collaboration between fintech innovation and regulatory foresight will determine not just how fast we grow, but how safely we grow."
