SEBI Proposes Easier KYC for NRIs, OCIs and Foreign Nationals: What It Means for AIFs
SEBI has proposed a significant relaxation in the KYC onboarding process for Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs) and foreign nationals located outside India.
The proposed framework could make it substantially easier for overseas investors to complete KYC and participate in India’s securities market without having to be physically present in India.
For Indian Alternative Investment Funds (AIFs), the proposal could have an important operational impact, particularly when onboarding overseas Limited Partners (LPs).
What Has SEBI Proposed?
SEBI issued a consultation paper on 14 August 2026 titled “Review of Know Your Client process for individual Persons Resident Outside India.”
The consultation paper proposes allowing individual Persons Resident Outside India (PROIs) to complete digital KYC while located outside India, provided they are in a FATF-compliant country.
Currently, digital onboarding of non-resident clients requires the client to be physically present in India. This has created significant friction for overseas investors, who may otherwise have to rely on physical documentation, courier services, notarisation and other offline processes.
SEBI is now proposing to remove this India-presence requirement for eligible PROI clients.
Who Does the Proposal Cover?
For the purpose of the consultation paper, individual PROI clients include:
Non-Resident Indians (NRIs)
Overseas Citizens of India (OCIs)
Foreign nationals located outside India
The proposal is specifically focused on simplifying their KYC and digital onboarding process.
Foreign nationals seeking registration as a Foreign Portfolio Investor (FPI) would continue to be governed by the applicable FPI framework.
What Will Change Under the Proposed Framework?
1. Digital KYC From Outside India
The most significant proposed change is that an eligible PROI investor would no longer need to be physically present in India to complete digital KYC.
The intermediary would be permitted to accept KYC records and related documents digitally from a client located in a FATF-compliant country.
This could remove one of the biggest barriers to fully digital onboarding of overseas investors.
2. Electronic Signing of KYC Documents
The proposal allows the KYC form to be submitted through physical or digital channels.
The intermediary could accept:
An original physical KYC form
A scanned copy of a physical form under electronic signature
A digital KYC form under electronic signature
For specimen signatures, the investor could provide a cropped image of the signature electronically. During Video In-Person Verification (VIPV), the investor would then provide a wet signature, which the intermediary would verify against the submitted specimen signature.
3. Video In-Person Verification From Overseas
SEBI proposes allowing Video In-Person Verification (VIPV) for PROI clients located outside India.
However, this would not simply be a standard video call.
The proposed process includes several safeguards, including:
Client consent recorded in an auditable and alteration-proof manner
Random actions to establish that the interaction is live
Live GPS coordinates and timestamp
Protection against spoofed IP addresses, VPNs and proxy servers
Clear capture of the client’s photograph
Face-liveness and spoof detection
End-to-end encryption
Verification by an authorised official of the intermediary
Concurrent audit of the VIPV process
The client’s IP address would also need to originate from India or a FATF-compliant country and correspond with the country declared in the KYC documentation.
4. Greater Flexibility Around Overseas Addresses
The proposal also addresses the practical difficulty of verifying the current overseas address of a PROI.
Where an officially valid document can be verified through an official or source database, but the investor wants to provide a different current address, the investor may be permitted to provide a self-declaration of the current address.
This could simplify onboarding where the address on a passport or other officially valid document is not the investor’s current residential address.
5. Foreign Mobile Numbers
Verification of foreign mobile numbers can be difficult and costly for intermediaries, particularly where OTP-based verification is involved.
Under the proposed framework, the intermediary would collect the investor’s mobile number and email address. The mobile number would be verified if feasible, while the email address would also be verified through OTP or another verifiable mechanism.
This is particularly relevant for overseas investors who do not maintain an Indian mobile number.
KYC Portability Could Become Much More Important
Another important proposal relates to KYC portability.
SEBI proposes that KYC records for individual PROIs should be treated as portable.
Individual attributes within the KYC record would be tagged as “validated” where they have been verified against official or source databases.
This could reduce the need for an overseas investor to repeatedly submit the same KYC information when approaching different intermediaries.
For investors who interact with multiple financial institutions, brokers, fund managers or other regulated intermediaries, this could significantly reduce repetitive onboarding.
Greater Reliance on Existing KYC
The proposed framework would also allow an intermediary to rely on KYC undertaken by:
Another SEBI-registered intermediary; or
An entity regulated by another financial-sector regulator,
based on records obtained through the KRA/CKYCRR framework.
However, the intermediary would continue to have ultimate responsibility for the KYC of its own clients and would be required to undertake enhanced KYC measures where appropriate based on the client’s risk profile.
What Does This Mean for AIFs?
This proposal could be particularly relevant for India’s AIF industry.
Indian AIFs regularly onboard investors who are based outside India, including NRIs, OCIs and other eligible foreign investors.
Historically, overseas investor onboarding can involve multiple steps, including:
KYC documentation → notarisation/certification → courier → document verification → IPV → KRA registration → AML checks → subscription documentation
The proposed framework could allow much of this process to move towards a completely digital workflow.
For an AIF manager, the future onboarding journey could look more like:
Investor Registration → PAN/Passport → Digital KYC → Electronic Signature → Address Verification → FATF Country Check → VIPV → Liveness/Anti-Spoofing → AML Screening → KRA/CKYCRR → Subscription Documentation → Investor Onboarded
This could significantly reduce onboarding time and operational friction for overseas LPs.
What AIF Managers Should Prepare For
Although the proposal is not yet a final regulatory requirement, AIF managers and fund administrators should start evaluating whether their investor onboarding infrastructure can support the proposed model.
Key areas include:
1. Digital Overseas KYC
The onboarding platform should be capable of collecting KYC information and supporting documents digitally from investors located outside India.
2. FATF Country Screening
The investor’s country of residence would become an important part of the onboarding decision.
3. Video KYC / VIPV
A robust VIPV workflow will need to support liveness detection, GPS capture, anti-spoofing and appropriate audit trails.
4. KRA and CKYCRR Integration
The proposed portability framework makes integration with KRA and CKYCRR increasingly important for efficient investor onboarding.
5. AML and Risk Assessment
Digital onboarding does not remove the intermediary’s responsibility for KYC, AML or risk-based due diligence.
The proposed framework specifically retains the intermediary’s ultimate responsibility for KYC and allows enhanced KYC measures based on the investor’s risk profile.
6. Cybersecurity and Auditability
SEBI’s draft framework states that the infrastructure used for KYC must comply with the Cyber Security and Cyber Resilience Framework (CSCRF) applicable to SEBI-regulated entities.
Therefore, digital KYC should not be treated simply as a front-end video onboarding feature. The underlying infrastructure, security controls, audit logs and data protection mechanisms will also be important.
Why This Matters for the Indian AIF Ecosystem
The proposed changes come at a time when India’s investment ecosystem is becoming increasingly global.
Indian fund managers increasingly interact with investors who may be based in the US, UK, Singapore, UAE, Europe and other jurisdictions.
For these investors, the ability to complete KYC digitally from their country of residence could remove a significant operational barrier.
For AIF managers, this could mean:
Faster LP onboarding
Lower documentation and courier costs
Less manual intervention
Better investor experience
Greater KYC portability
More efficient fund administration
A more scalable digital onboarding process
The change could therefore be more than just a KYC simplification. It could contribute to the broader digitisation of India’s private capital ecosystem.
What Happens Next?
This is currently a SEBI consultation paper and proposed framework, not a final regulatory requirement.
SEBI has invited public comments on the proposal, including whether digital onboarding should be permitted for PROI clients located in FATF-compliant countries and whether additional safeguards should be introduced for VIPV.
The deadline for submitting comments is 4 September 2026.
Once the final circular is issued, the proposed framework states that the provisions would come into effect 30 days after the date of issue.
Conclusion
SEBI’s proposal to simplify KYC for NRIs, OCIs and foreign nationals could materially improve the experience of overseas investors participating in India’s securities market.
For AIFs, the potential impact is particularly significant.
If implemented substantially as proposed, fund managers could move towards a more seamless digital LP onboarding experience, combining KYC, document verification, video verification, AML screening, KRA/CKYCRR checks and subscription documentation into a single technology-enabled workflow.
For an industry increasingly dependent on global capital, this is a welcome step towards making India’s private investment ecosystem easier to access from anywhere in the world.
AIF managers, fund administrators and technology providers should closely monitor the final SEBI circular and begin evaluating their existing investor onboarding processes against the proposed framework.
Disclaimer: This article is based on SEBI’s consultation paper dated 14 August 2026 and describes proposals that are subject to the consultation process. It should not be treated as legal or regulatory advice.
Source: Securities and Exchange Board of India (SEBI), Consultation Paper – Review of Know Your Client process for individual Persons Resident Outside India, issued 14 August 2026.