AUTHENTICATION WITHOUT DISPLACEMENT: THE SCOPE OF RBI’S OVERSEAS CERTIFICATION ROUTE FOR FPIS

This piece is authored by Adarsh Kumar, second-year, B.Sc. LL.B (Hons.) student and Raghav Kumar, third-year, B.A. LL.B (Hons.) student at Gujarat National Law University, Gandhinagar.

Introduction

The Reserve Bank of India (‘RBI’) issued the Reserve Bank of India (Commercial Banks – Know Your Customer) Amendment Directions, 2026 on 18 September 2026, extending to Foreign Portfolio Investors (‘FPIs’) the alternative procedure of documentary certification previously available to Non-Resident Indians (‘NRIs’) and Persons of Indian Origin (‘PIOs’) under Paragraph 5(1)(v) of the Reserve Bank of India (Commercial Banks – Know Your Customer) Directions, 2025. Ordinarily, a bank obtains a certified copy by comparing a copy of the relevant identity document with the original and recording that comparison on the copy. This definition is general rather than function-specific: it governs wherever the Directions require a certified copy, whether for an individual customer or for the constitutional documents of a legal person. For the specified categories of non-resident customers, Paragraph 5(1)(v) allows the bank to “alternatively obtain” an original certified copy authenticated by one of the six prescribed overseas authorities, including a Notary Public, Judge, Court Magistrate, Indian Embassy or Consulate General, and specified overseas bank officials.

The amendment changes how documentary certification may be completed; it does not alter the wider customer due diligence (‘CDD’) framework. This article deals with commercial bank KYC, not the SEBI/Designated Depository Process (‘DDP’) for FPIs’ registration and securities-market onboarding. The more difficult issue is whether, after a bank has relied on the alternative route, a subsequent request serves an independent due-diligence purpose or merely repeats a certification exercise already completed.

Existing commentary on the amendment is largely descriptive, reporting the extension to FPIs and the authorities who may certify. None addresses the question arising after the route has been used: whether a bank that has accepted an overseas-certified document may still require the original.

The Limited Function of Certification

The RBI Directions show why accepting a certified identity document cannot be equated with completing the whole CDD inquiry. Paragraph 23 governs CDD of individuals not only as customers in their own right but also as beneficial owners, authorised signatories or power-of-attorney holders connected with a legal entity. Paragraph 33 separately requires specified documents when a company opens an account, including Paragraph 23 documents of relevant beneficial owners or authorised persons.

This is particularly relevant to FPIs that are juridical persons. The bank does not obtain a single officially valid document (‘OVD’) for one representative natural person: Paragraph 23 requires CDD in respect of each natural person connected with the account, so a separate OVD is required for every beneficial owner, authorised signatory and attorney-holder. Paragraph 38 imposes the distinct duty to identify the beneficial owner of a legal person and to take all reasonable steps, in terms of Rule 9(3) of the Prevention of Money-laundering (Maintenance of Records) Rules, 2005 (‘PML Rules’), to verify that person’s identity. Rule 9(3) does not apply one test to every entity: for a company, the beneficial owner holds more than ten per cent of the shares, capital or profits or exercises control through other means, while separate criteria apply to partnerships, unincorporated associations and trusts, and listed entities and their subsidiaries are exempt from that inquiry. Documentary identity concerns who a person is, whereas beneficial-ownership analysis asks what ownership or control relationship that person has with the legal entity. A certified passport may help with the first inquiry, but cannot, without more, establish the second.

One qualification is necessary. FPIs already make detailed beneficial-ownership disclosures to their Designated Depository Participants under the SEBI framework, so where the bank’s Rule 9(3) inquiry covers the same ground, beneficial ownership is a weaker illustration of independent verification than it first appears. The frameworks remain distinct, since the bank’s duty arises from its own status as a reporting entity under the PMLA, but the overlap narrows that independent purpose rather than removing it.

Rule 9(12) requires ongoing due diligence and, where there is suspicion of money laundering or terrorist financing (‘ML/TF’) or doubt about previously obtained identification data, a review of due-diligence measures including re-verification of identity. Rule 9(13) separately requires institutions to assess and mitigate ML/TF risks. Section 12AA of the Prevention of Money-laundering Act, 2002 (‘PMLA’) goes further: before each specified transaction, a reporting entity must verify identity, examine ownership and financial position including sources of funds, and record the transaction’s purpose. The Explanation to Section 12AA defines these to include prescribed cash and foreign-exchange transactions, high-value imports or remittances and others carrying heightened ML/TF risk. A certified OVD obtained at onboarding cannot by itself answer these transaction-specific questions.

“May Alternatively Obtain”: Discretion Before Reliance

Paragraph 5(1)(v) states that a bank “may alternatively obtain” the overseas-certified document. This appears to leave the bank some choice over whether to use that route; it does not necessarily entitle an FPI to insist upon it. Once the bank uses the route and accepts the document as satisfying the certified-copy requirement, however, the question changes. The ordinary definition of a certified copy requires the bank itself to compare the copy with the original. The proviso provides an alternative to that comparison.

Two readings are available. On the first, the proviso merely adds a permitted means of satisfying the certified-copy requirement and leaves the bank’s discretion to call for originals untouched, the Directions containing no words of express restriction. On the second, the definition and the proviso are read together, so that a bank free in every case to demand the comparison it has just dispensed with, renders the alternative useless. The absence of restricting words is a real difficulty for the second reading, but it remains preferable: the distinction limits not the bank’s discretion to seek an original for any purpose, but only its freedom to repeat the same comparison for the same requirement.

The Paragraph 65 Analogy

Paragraph 65 serves as a valuable internal analogy. Where a bank downloads and relies on current, compliant Central KYC Records Registry (‘CKYCR’) records, the Directions state that it “shall not be required to re-verify” the authenticity of the customer’s identity or address, while remaining responsible for all other aspects of CDD.

The analogy has its limits. Unlike Paragraph 65, Paragraph 5(1)(v) does not expressly dispense with re-verification. This difference matters, and the two provisions serve distinct regulatory functions. Paragraph 65 deals with whether the existing CKYCR records should be re-verified, while Paragraph 5(1)(v) gives an alternative way of fulfilling the requirement of certified copy. The absence of an express exemption from re-verification limits the argument, but does not deprive “alternatively” of its significance. The anti-duplication argument for Paragraph 5(1)(v) is based upon the meaning and nature of the alternative mechanism itself and not on an express prohibition.

Paragraph 65 also supplies a model of reasoning. Sub-paragraph (10)(iv) preserves the bank’s power to require KYC documents again where necessary to verify identity or address, to perform enhanced due diligence or to build a risk profile. The framework therefore already separates repeating an accepted verification from a request serving a further, specified purpose, by reference to function.

Acceptance of an overseas-certified document does not displace the bank’s wider CDD obligations. Nor do those obligations, by themselves, justify mechanically repeating an authentication exercise already completed through a recognised alternative route.

Beyond the “Same Document” Test

The distinction between the same document and a different document is too simple. A bank may need to examine the same document again for a different regulatory reason; it may equally request another document that adds nothing to a verification already completed, or ask for one merely to repeat that exercise. The purpose of a request should therefore be judged by the regulatory function towards which it is reasonably directed, not by whether the same document, information or exercise has been sought before. Describing a request as “risk-based” does not, by itself, show that it serves a different purpose from the certification already accepted.

This standard has no formal basis in the present framework. It is an interpretive proposition drawn from the structure of the Directions, stated neither there nor in the PML Rules or the PMLA, and no mechanism exists by which an FPI may invoke it or by which a bank must justify a further request against it. Paragraph 65(10)(iv) shows that RBI is willing to specify such purposes; a comparable clarification for Paragraph 5(1)(v) would be needed before the standard could operate as more than a reading of the provision.

Duplication is evident where a bank has relied on a passport certified abroad under Paragraph 5(1)(v) and then requests the original only because its standard practice is bank-side comparison, there being no discrepancy, separate risk concern or other CDD requirement to account for the request. The additional comparison serves the same function as the authentication already accepted, and requiring both in sequence makes it difficult to see how Paragraph 5(1)(v) operates as a genuine alternative. If instead the certified passport shows inconsistent dates, conflicting details, unusual formatting or signs of tampering, inspecting the original may resolve doubts about authenticity, and Rule 9(12) requires a review of due-diligence measures where such doubts arise.

The same reasoning applies to sanctions screening and beneficial-ownership details. Sanctions screening rests on an independent footing: the Customer Acceptance Policy requires a bank to ensure that the identity of the customer does not match any person or entity named in the sanctions lists dealt with in Chapter IX of the Directions. Further evidence of identity may still be required for a very similar name match, even after successful certification. Likewise, when a passport proves a person’s identity but ownership documentation suggests that another person exercises ultimate control, shareholding documents, control agreements or ownership records address the separate inquiry under Paragraph 38 and Rule 9(3). Source-of-funds inquiries, unusual transactions and other risk-based requests work on the same basis. The justification for such requests must be found in the regulatory functions they perform, and not in the fact that they come after the overseas certification of identity.

Conclusion

The amendment therefore points to three conclusions.

First, the phrase “may alternatively obtain” in Paragraph 5(1)(v) provides for the possibility of an alternative certification method. It does not mean, however, that all FPIs have an automatic right to insist on the alternative method.

Second, once a bank accepts an overseas-certified copy as satisfying the requirement, repeating ordinary original comparison solely for the same purpose is difficult to justify under the structure of the provision. Paragraph 65 supports that distinction while also, through its express anti-reverification language, marking the limit of the analogy.

Finally, nothing precludes further verification reasonably directed towards an independent regulatory purpose. Furthermore, verification may be justified by authenticity concerns, inconsistent information, sanctions screening, beneficial-ownership questions, ML/TF risks, source-of-funds inquiries, ongoing due diligence or transaction-specific obligations where the circumstances require it.