SEBI Releases New Rules For KRAs Closing Their Businesses

• 08 Sep 2025
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For facilitating winding down businesses of know-your-customer (KYC) registration agencies (KRAs) in an orderly manner, the Securities and Exchange Board of India (SEBI) has released new rules. 

In a circular dated 2.09.2025, SEBI said, “It is decided that the process for surrender of KRA registration should be streamlined for voluntary/involuntary scenarios so that critical operations and services of KRA are wound down in orderly manner.”

New Rules for KRAs by SEBI

The new rules for KRAs surrendering their license are as follows:

• Transfer of KYC Data to Another KRA: As per the new SEBI regulations, the KYAs will be required to hand over all the investor KYC records to another KRA that is registered with SEBI. At the time of transfer, the KRA are required to share all the updates as well as modifications, with a complete audit trail so that no data gets lost or tampered with. This is being done to make sure investors get uninterrupted services without having to go through the KYC again. 

• Requirement of SOP: According to SEBI, every KRA needs to have a board approved Standard Operating Procedure (SOP) in place, in case the KRA chooses to surrender its license, whether voluntarily or due to regulatory action or financial strain. In the SOP, it must be clearly defined how the exiting KRA will transfer its operations and services to a new KRA. In addition to this, the exiting KRA will need to make sure that investor KYC data and intermediaries’ records remain safe, all contracts and legal obligations are settled in a timely manner and that there’s no disruption in the securities market. SEBI said, “The SOP should specify, the operational modalities relating to transfer of records, data, documents etc. in detail, duly considering interoperable as well as non-interoperable scenarios, as applicable.” It added, “the SOP shall be uniform and mutually agreed upon amongst KRAs.”

• Constitute Oversight Committee: A KRA that chooses to surrender its license must form an Oversight Committee, according to Sebi guidelines. This committee will monitor the winding down process to make sure the KYC data is transferred properly and that investor services continue to operate smoothly as outlined in SOP. Additionally, KRAs are required to publish SOPs on their websites within 90 days from the issuance of the circular dated September 5. They must also review these procedures periodically, i.e., at least once every five years.

How Do the New Rules Affect Investors?

With the implementation of these new rules, investors will not be required to undergo the KYC verification process again. They will not face any inconveniences if their KRA decides to wind down operations. 

The new rules will guarantee that the investors’ records are securely transferred to another KRA and that services continue for them without any interruption.

Source: Outlook Money