Who is a politically exposed person?

According to the RBI guidelines, “politically exposed persons” are individuals who are or have been entrusted with prominent public functions. It mentions senior politicians, senior government/judicial/military officers, senior executives of state-owned corporations, important political party officials etc.

The Securities and Exchange Board of India (SEBI) in its circular dated December 19, 2008, mandated mutual fund companies to capture information on whether an investor is politically exposed person.

In 2015, the Insurance Regulatory and Development Authority of India (IRDAI) also directed all insurers to ensure appropriate risk management procedures for identifying and applying advanced due diligence measures to PEPs.

It may be concluded that Indian banks are not required or mandated to ask citizen’s political affiliation or ideologies. Only the non-resident Indians who wish to open bank account or invest in India are required to disclose if they are politically active in foreign countries.

In December 2019, soon after the Citizenship Amendment Act (CAA) was passed, media reports surfaced to suggest that banks may introduce a new column in KYC forms seeking depositors and clients to mention their religion. It was assumed that such a requirement arises in the wake of the changes made to FEMA Act regulations, which extend the benefits of opening NRO accounts and holding property to select religious minorities, excluding Muslims.