The Reserve Bank of India (RBI) has changed the definition of Politically-Exposed Persons (PEPs) under its norms, a move that will make it easier for those individuals to carry out various banking transactions, including availing loans.
Certain changes have been made in the RBI's Know Your Customer (KYC) norms.
The earlier norms pertaining to PEPs were open-ended and there was a lack of clarity on the definition, apparently leading to issues for bankers, parliamentarians and others. There were also concerns in certain quarters that PEPs were finding it difficult to get loans or open bank accounts.
In the amended KYC master direction, the central bank defines PEPs as "individuals who are or have been entrusted with prominent public functions by a foreign country, including the heads of states/governments, senior politicians, senior government or judicial or military officers, senior executives of state-owned corporations and important political party officials".
The new rules also include a person who is entrusted by a foreign country with a public function.
Bank accounts of PEPs have additional KYC norms under the current provisions and special due diligence has to be undertaken by a senior bank official.
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A sub-clause in the master direction in KYC norms issued by way of a circular on February 25, 2016 has been removed by the central bank.
The central bank has also asked chairpersons and chief executives of banks and other financial services, which are into lending business, to make the changes effective immediately.
Last year, the Centre amended the Prevention of Money Laundering Act (PMLA) to introduce more disclosures for non-government organisations by reporting entities.