February 2025

Customer Risk Assessment

What Is Customer Risk Assessment?

Customer risk assessment is important to the banking sector’s approach to protecting its operations and ensuring compliance with regulatory requirements. It involves evaluating the potential risks associated with individual customers to prevent financial crimes such as money laundering, fraud, and terrorist financing. Banks and other financial institutions must assess the risk profile of each customer to determine the level of scrutiny and monitoring required.

The process has become increasingly critical due to the increasing complexity of financial transactions and the regulatory pressures placed on institutions to prevent illegal activities. Effective customer risk assessment not only helps financial institutions mitigate these risks but also protects their reputation, ensures regulatory compliance, and contributes to a more secure banking environment.

What Is Customer Risk Assessment In Compliance?

Customer risk assessment plays a key role in ensuring that financial institutions meet the stringent requirements set out by regulators. Compliance with anti-money laundering (AML) and counter-terrorist financing (CTF) regulations is mandatory for banks and other financial organisations. A robust risk assessment framework not only helps prevent illegal activities but also protects the institution from hefty fines, reputational damage, and potential legal repercussions.

Financial regulators such as the Financial Conduct Authority (FCA) in the UK require banks to assess the risk associated with each customer, considering factors like the customer’s location, the nature of their business, and their transaction patterns. This is where Know Your Customer (KYC) procedures come into play, as they provide the necessary data for a thorough risk assessment. Through this process, banks can identify whether a customer poses a low, medium, or high risk.

For high-risk customers, more stringent monitoring and due diligence are required. This could include enhanced due diligence (EDD), where banks investigate deeper into the customer’s financial history and sources of wealth. On the other hand, customers deemed low-risk may undergo less frequent checks, allowing the bank to focus its resources where they are needed most.

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Methods Of Conducting Customer Risk Assessments

Conducting a customer risk assessment involves several steps that enable banks to categorise their customers based on the level of risk they present. These methods can vary depending on the size and complexity of the financial institution, but generally, the process follows a systematic approach. Here are some common methods used in conducting customer risk assessments.

1. Know Your Customer (KYC) and Customer Due Diligence (CDD)

At the heart of customer risk assessment lies KYC, which mandates that financial institutions verify the identity of their customers. KYC procedures typically involve collecting key details, such as a customer’s full name, date of birth, address, occupation, and source of funds. This is usually done at the time of onboarding a new client or when a customer’s risk profile needs to be reassessed.

Following KYC, Customer Due Diligence (CDD) is carried out to assess the potential risks associated with the customer. CDD involves examining the nature of the customer’s business activities, the sources of their funds, and their overall financial history. If the customer is deemed to present a higher level of risk, more in-depth procedures like Enhanced Due Diligence (EDD) may be required.

2. Transaction Monitoring

Ongoing monitoring of a customer’s transactions is another crucial element of risk assessment. Banks use sophisticated software tools to track transactions in real time and identify any patterns that deviate from the customer’s normal behaviour. For instance, if a customer begins to make unusually large transfers or engages in cross-border transactions, this could raise a red flag.

Automated transaction monitoring systems use predefined rules to highlight suspicious activities, which are then flagged for review by compliance teams. Regular transaction monitoring allows banks to adjust their risk profiles in response to any changes in customer behaviour and mitigate risks proactively.

3. Risk Scoring and Profiling

Risk scoring involves assigning a numerical value to a customer’s risk level based on various factors, such as their geographical location, industry, transaction history, and personal or corporate background. Each of these factors is weighted to determine an overall risk score. Customers with higher scores are considered to pose a greater risk, and thus, they may be subject to more frequent checks and additional due diligence.

Risk scoring helps financial institutions prioritise their resources effectively, focusing on higher-risk customers while ensuring that lower-risk customers continue to receive standard levels of monitoring.

The Importance Of Customer Risk Assessment For Banks And Customers

Customer risk assessment is vital not only for the protection of financial institutions but also for maintaining a secure and transparent financial system for customers. Both the bank and the customer stand to benefit from an effective risk assessment process, which ensures compliance with regulations and reduces the potential for financial crimes.

For Banks:

For banks, the primary importance of conducting customer risk assessments lies in regulatory compliance. As financial institutions are under increasing scrutiny from regulators, particularly around anti-money laundering (AML) and counter-terrorist financing (CTF), maintaining a rigorous customer risk assessment process helps banks avoid penalties and reputational damage.

Another key benefit is risk mitigation. By assessing the risk level of each customer, banks can better protect themselves from fraud, money laundering, and other illicit activities that could lead to financial loss. Banks also benefit from the efficient allocation of resources, as high-risk customers require more attention, while low-risk customers can be managed with less intervention.

Moreover, conducting a thorough risk assessment also helps build trust with regulators, stakeholders, and customers. A bank that demonstrates a commitment to protecting against financial crimes and adhering to regulatory standards is more likely to establish credibility and maintain a solid reputation.

For Customers:

While customer risk assessments are primarily designed to protect the financial institution, they also have benefits for the customers themselves. An effective risk assessment system helps reduce the likelihood of fraud or other financial crimes, ensuring that a customer’s assets and personal information are protected.

Moreover, customers who undergo a thorough risk assessment are likelier to experience smoother banking services. Financial institutions use this data to personalise their services, ensuring that the right products and services are offered to the right customers based on their risk profile.

Additionally, customers who are subject to enhanced due diligence might find that they are monitored more closely, but this monitoring helps identify any fraudulent activity or security threats before they escalate, ultimately contributing to the overall safety of the customer’s financial interests.

In essence, customer risk assessment serves as a foundational tool for ensuring a safe and compliant banking environment, benefiting both the institution and its clientele by maintaining the integrity of financial systems.

Issues With Customer Risk Assessment

While customer risk assessment is an essential process for ensuring compliance and mitigating risks in banking, it is not without its challenges. Financial institutions face several obstacles in conducting effective and accurate risk assessments, and overcoming these challenges requires a combination of technology, skilled personnel, and well-defined processes.

1. Data Quality and Availability

One of the primary challenges in customer risk assessment is ensuring the accuracy and completeness of the data used for risk profiling. Financial institutions rely heavily on the information provided by customers during the onboarding process. However, if this data is inaccurate, incomplete, or outdated, it can lead to misclassification of risk levels, resulting in poor decision-making. Moreover, obtaining relevant and trustworthy data from customers, especially those in high-risk regions or industries, can be a complex and time-consuming task.

To mitigate this challenge, banks need to implement robust data verification methods, including third-party data sources and digital verification technologies, to ensure the quality and reliability of the information they use for assessments.

2. Regulatory Complexity

Banks must navigate a complex landscape of ever-evolving regulations when conducting customer risk assessments. Regulations related to anti-money laundering (AML), counter-terrorist financing (CTF), and other financial crimes vary by jurisdiction and can change frequently. Financial institutions must keep pace with these regulatory changes to ensure they remain compliant.

For example, different countries have varying standards for what constitutes “high-risk” activities or individuals, which can complicate cross-border customer risk assessments. Compliance teams must stay updated on regulatory changes and adapt their processes accordingly to avoid potential penalties.

3. Balancing Customer Experience with Security

Financial institutions face the ongoing challenge of balancing security measures with the customer experience. While thorough risk assessments and enhanced due diligence procedures are essential for protecting both the bank and its customers, these processes can sometimes lead to friction in customer interactions. Customers may become frustrated with lengthy onboarding processes, multiple verification steps, or delays caused by heightened scrutiny.

To address this, banks must invest in customer-centric solutions that allow for a smooth, efficient onboarding experience while still adhering to security and regulatory requirements. Technologies such as automated verification, biometric authentication, and machine learning can help streamline the process without sacrificing security.

4. Resource Constraints

Customer risk assessments, especially those involving enhanced due diligence, can be resource-intensive. Smaller financial institutions or those with limited resources may struggle to dedicate the necessary staff, time, and technology to conduct thorough assessments for every customer, particularly when dealing with a large volume of clients.

To overcome this, many banks are turning to automated solutions and artificial intelligence (AI) to assist in customer risk assessments. These tools can quickly analyse large datasets and flag high-risk individuals or transactions, allowing banks to prioritise their resources effectively.

5. Upcoming Threats

The ever changing nature of financial crimes presents another challenge. Criminals are continuously adapting their methods to exploit vulnerabilities in banking systems, meaning that banks must remain vigilant in updating their risk assessment strategies. New technologies, such as digital currencies or peer-to-peer payment platforms, can introduce additional risks that banks must account for in their assessments.

To stay ahead of emerging threats, banks must integrate advanced risk assessment tools that can adapt to new types of financial crime and help identify suspicious activities in real time.

Customer Risk Assessment In Banking Future

As the financial services industry continues to evolve, so too must the methods used to assess customer risk. Advances in technology, increased regulatory pressure, and the rise of new financial products and services are reshaping how banks and other financial institutions approach risk assessment. In the future, we are likely to see significant shifts in both the tools and strategies used for customer risk profiling.

1. Integration of Artificial Intelligence (AI) and Machine Learning (ML)

Artificial intelligence (AI) and machine learning (ML) are already playing a significant role in the banking industry, and their impact on customer risk assessment is expected to grow. AI can help automate and accelerate the risk assessment process by analysing vast amounts of data to detect patterns, identify potential risks, and predict customer behaviours.

For instance, ML algorithms can be trained to recognise subtle indicators of fraudulent activities that might go unnoticed by traditional methods. These technologies enable banks to move towards predictive risk assessment, where the focus is on forecasting potential threats based on historical data, rather than reacting to incidents after they occur. This shift promises to enhance the accuracy and efficiency of risk assessments, reducing the likelihood of fraud while providing a better experience for customers.

2. Increased Use of Biometric Authentication

Biometric authentication, such as facial recognition, fingerprint scanning, and voice recognition, is expected to become more widespread in customer onboarding and risk assessment processes. By linking customer identification with biometrics, banks can enhance the accuracy of customer verification while reducing the risk of identity theft and fraud.

As biometric technologies become more sophisticated, they will allow for seamless and secure verification processes that offer greater convenience for customers. The integration of biometrics into risk assessments will also help institutions identify and mitigate risks associated with identity theft and fraudulent account openings more efficiently.

3. Enhanced Regulatory Technology (RegTech)

The rise of RegTech is revolutionising how financial institutions comply with regulations and conduct customer risk assessments. RegTech platforms use cutting-edge technologies such as AI, data analytics, and cloud computing to help banks streamline compliance processes, enhance risk detection, and monitor customer activities in real-time.

These tools can assist banks in staying compliant with regulatory requirements by automating routine compliance tasks, improving data accuracy, and ensuring that all necessary due diligence measures are taken. In the future, RegTech solutions will continue to play a central role in simplifying the risk assessment process while ensuring that banks remain agile in a rapidly changing regulatory landscape.

4. Cross-Border Risk Assessment Integration

As financial institutions continue to expand their global reach, the need for cross-border risk assessments will increase. Banks will need to adopt more robust, automated systems that can analyse customer data across multiple jurisdictions, taking into account the varying regulatory standards and risk factors in different regions.

With the rise of globalisation and the expansion of digital banking, financial institutions will increasingly need to collaborate with international partners and regulators to ensure that their risk assessment frameworks are effective and consistent across borders.

5. Increased Customer Transparency and Control

In the future, customers may have more control and transparency over how their data is used in risk assessments. With the growing emphasis on data privacy and protection, financial institutions may need to provide more clarity regarding how customer information is collected, stored, and used for risk profiling.

Customers may also be able to access and update their risk profiles, ensuring that the information used in the risk assessment process is accurate and up to date. This increased transparency can help build trust between customers and financial institutions, ultimately leading to a more positive banking experience.

Conclusion

The landscape of customer risk assessment in banking is evolving rapidly, driven by technological advancements, regulatory changes, and shifting customer expectations. Banks must stay ahead of these changes to effectively manage the risks associated with their customers while ensuring compliance and protecting their reputation.

By integrating advanced technologies such as AI, machine learning, and biometric authentication, financial institutions can enhance the accuracy and efficiency of their risk assessments, offering a more secure and seamless experience for both banks and their customers. With the continued growth of global financial services and the introduction of new technologies, customer risk assessment will remain a cornerstone of banking practices for years to come.

By Abhinandan, ago
Credit Underwriting in India

Credit Underwriting In India: All You Need To Know

Whether you’re a finance professional, a recent graduate stepping into the world of banking, or simply someone curious about how loans get approved, credit underwriting is something you’ll encounter often. It’s the process lenders use to decide whether someone qualifies for a loan, how much they can borrow, and at what interest rate.

In India, credit underwriting has changed significantly over the years. Earlier, banks and financial institutions relied solely on salary slips, bank statements, and credit scores. But today, lenders assess everything from transaction history and spending patterns to even digital footprints in some cases. With the rise of fintech companies and AI-driven risk models, loan approvals are faster but more complex than before.

So, how does credit underwriting work? What do lenders look at before approving a loan? And how have regulations and technology shaped the process?

This blog breaks it all down in a simple yet insightful way, helping you understand what goes on in the world of credit underwriting.

What Is Credit Underwriting?

Credit underwriting is the process lenders use to evaluate whether a borrower is financially capable of repaying a loan. It’s an important step in lending, ensuring that banks, NBFCs, and digital lenders don’t take on unnecessary risk while also making credit accessible to eligible borrowers.

This can be thought of as a financial background check. When you apply for a loan—whether it’s a home loan, personal loan, or business loan—the lender doesn’t just hand over the money. Instead, they dig into your financial history, analyse your ability to repay, and assess the likelihood of default.

Traditionally, underwriting was a manual process. Loan officers would sift through documents, verify income sources, and determine creditworthiness based on set parameters. But today, thanks to AI and data analytics, underwriting has become faster, more data-driven, and even predictive.

The goal of credit underwriting is simple: to balance risk and reward. Lenders want to approve as many loans as possible to grow their business, but they also need to be cautious and ensure that they are lending to individuals and businesses that can repay on time.

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How Lenders Evaluate Borrowers: Key Factors In Credit Underwriting

Lenders don’t just approve or reject a loan application based on a single factor. Instead, they take a holistic view of a borrower’s financial profile to determine whether granting credit is a safe and viable decision. From checking credit scores to assessing spending behaviour, modern underwriting is a blend of traditional and tech-driven risk evaluation.

Here’s a closer look at the factors that influence credit underwriting decisions in India.

1. Credit Score and Repayment Behaviour

The credit score is one of the first things a lender examines when assessing a borrower’s creditworthiness. In India, credit scores are issued by major credit bureaus such as CIBIL, Equifax, Experian, and CRIF High Mark, based on a borrower’s financial history.

A higher credit score (typically 750 and above) indicates responsible credit usage and timely repayments, leading to:

  • Faster loan approvals
  • Lower interest rates
  • Higher loan amounts

However, a poor credit score (below 650) can result in:

  • Loan rejections
  • Higher interest rates
  • Stricter repayment terms

Beyond the score itself, lenders also analyse a borrower’s repayment behaviour. Consistently missed EMIs, frequent delays, or past defaults raise red flags, making it harder to secure new loans.

2. Income Stability and Source of Earnings

Lenders assess whether a borrower has a stable source of income to ensure consistent repayment ability. This factor is particularly crucial for unsecured loans (such as personal loans) where there is no collateral backing the loan.

What lenders check:

  • For salaried individuals: Employer reputation, job tenure, and monthly salary. Those working in government jobs or well-established private firms often get loans more easily.
  • For self-employed individuals: Business stability, annual turnover, profit margins, and financial records such as tax returns and GST filings.
  • For freelancers/gig workers: Some lenders now consider alternative income sources such as contract work, rental income, and even digital earnings.

A steady and predictable income increases the chances of loan approval, whereas irregular earnings or job instability may result in a higher interest rate or outright rejection.

3. Debt-to-Income Ratio (DTI) – How Much Debt Is Too Much?

Even if a borrower has a good income, lenders check how much of it is already committed to existing debt obligations. This is measured using the Debt-to-Income (DTI) ratio, which is calculated as:

DTI= (Total Monthly Debt Payments / Total Monthly Income) ×100

For example, if someone earns ₹1,00,000 per month but already pays ₹50,000 in EMIs, their DTI ratio is 50%.

Why does this matter?

  • A DTI below 40% is considered safe, meaning the borrower can manage additional loan repayments.
  • A DTI above 50% signals financial strain, making lenders hesitant to approve new credit.

Lenders prefer borrowers with a lower DTI because it reduces the risk of over-leveraging, which could lead to missed payments or defaults.

4. Type of Loan and Security Provided – Secured vs Unsecured Lending

Not all loans are assessed equally. The underwriting process varies depending on whether the loan is secured (backed by collateral) or unsecured (granted purely based on creditworthiness).

  • Secured Loans (Home Loans, Auto Loans, Gold Loans, etc.) – Since the lender has an asset as security, credit risk is lower. Even borrowers with moderate credit scores may qualify if the collateral holds sufficient value.
  • Unsecured Loans (Personal Loans, Credit Cards, Business Loans, etc.) – These loans are riskier for lenders, leading to stricter credit evaluations and higher interest rates for applicants with weaker financial profiles.

For business loans, lenders also assess company performance, industry risks, and financial stability before making a lending decision.

5. Alternative Data And AI-Based Underwriting

With the rise of digital lending, many lenders now go beyond traditional credit scores and use alternative data to evaluate creditworthiness.

This includes:

  1. Utility bill payments – A borrower who consistently pays electricity, mobile, and rent bills on time may be considered financially responsible.
  2. Spending habits – Lenders analyse banking transactions to see how much a borrower saves, invests, or spends each month.
  3. Digital footprints – Some AI-based models assess online transactions, subscriptions, and even shopping patterns to predict financial behaviour.

For borrowers without a formal credit history (such as young professionals or gig workers), these alternative credit models offer a fairer assessment, allowing them to access loans even if they don’t have a CIBIL score.

6. Compliance with RBI Regulations

Lenders must also ensure that their underwriting process follows the Reserve Bank of India’s (RBI) regulations, which are frequently updated to improve financial stability.

Recent RBI measures include:

  • Stricter underwriting for unsecured loans to prevent excessive risk-taking.
  • AI and credit risk model guidelines to ensure fair lending decisions.
  • Mandatory credit reporting every 15 days to improve borrower transparency.

For P2P lending platforms and fintech lenders, RBI has imposed additional checks to protect borrowers from predatory lending practices and ensure transparency in loan disbursals.

How Borrowers Can Improve Their Creditworthiness

Understanding these factors can help borrowers improve their chances of securing a loan with favourable terms. Some simple yet effective steps to improve credit score include:

  • Maintaining a high credit score by paying EMIs and credit card bills on time.
  • Keeping the Debt-to-Income ratio below 40% to ensure financial stability.
  • Demonstrating income stability, whether through steady employment or consistent business earnings.
  • Building a credit history by using small credit products like secured credit cards or buy-now-pay-later (BNPL) services responsibly.

How Technology Is Changing Credit Underwriting In India

The way lenders assess borrowers has changed dramatically over the past decade. What was once a slow, manual process dependent on paperwork and human judgment is now faster, data-driven, and automated. Thanks to advancements in AI, alternative data, and automation, credit underwriting is becoming more efficient, accurate, and accessible.

Let’s break down the biggest changes.

AI Is Replacing Manual Credit Assessment

Traditionally, loan approvals involved human underwriters reviewing salary slips, bank statements, and credit history. This process was time-consuming and often biased towards borrowers with well-documented incomes.

Today, AI-driven underwriting models can:

  • Assess credit risk instantly by analysing thousands of data points.
  • Detect fraud by identifying document inconsistencies.
  • Predict repayment behaviour using advanced algorithms.

Lenders no longer rely only on credit scores—they now use AI models to predict future financial behaviour based on transaction history, spending patterns, and even digital payments.

Borrowers Without A Credit Score Can Now Get Loans

One of the biggest problems in India’s lending ecosystem has always been the lack of formal credit histories. Millions of people—especially gig workers, small business owners, and young professionals—struggle to get loans because they don’t have a CIBIL score.

To solve this, many lenders are now using alternative credit scoring models, which take into account:

  • Utility bill payments (electricity, mobile, rent)
  • Spending and saving patterns from bank accounts
  • Digital payment transactions (UPI, wallets, BNPL services)

This approach has made credit more inclusive, allowing first-time borrowers to access loans without relying on traditional credit reports.

Loans Are Getting Approved Faster With Automated Underwriting

In the past, loan approvals could take days or even weeks because banks had to manually verify documents and assess risk. Today, many lenders have moved to automated underwriting systems, where AI handles the entire decision-making process.

Here’s how automated underwriting works:

  • Borrowers apply online, and their financial data is instantly retrieved.
  • AI analyses income, spending behaviour, and creditworthiness.
  • Loan approval (or rejection) happens within minutes, with minimal human involvement.

For personal loans, credit cards, and small-ticket financing, many fintech lenders now offer real-time approvals, making borrowing easier and faster.

Video KYC And Digital Onboarding Have Replaced Paperwork

With RBI pushing for digital banking, loan applications no longer require physical paperwork. Instead, lenders now use:

  • Aadhaar-based e-KYC for instant identity verification.
  • Video KYC to complete onboarding remotely.
  • AI-driven document verification to detect fraud and forged details.

These changes have reduced operational costs for lenders and made borrowing seamless for customers, particularly in rural and semi-urban areas.

Blockchain Could Make Credit Histories More Transparent

Although still in the early stages, blockchain technology has the potential to make credit underwriting more secure and tamper-proof. If widely adopted, it could:

  • Store borrower credit histories on a decentralised network, preventing fraud.
  • Allow borrowers to own and share their financial data securely with lenders.
  • Reduce dependency on centralised credit bureaus and speed up loan approvals.

While blockchain-based lending hasn’t become mainstream yet, it’s expected to play a larger role in the future of trust-based digital credit models.

Technology is reshaping the lending landscape, and borrowers need to understand how it impacts them.

If you’re applying for a loan, this means:

  • Faster loan approvals (often within minutes).
  • More accurate risk assessments, reducing unfair rejections.
  • Better access to credit, even for those without a CIBIL score.

Challenges And Limitations In Credit Underwriting

While credit underwriting has become faster and more data-driven, it is far from perfect. Lenders still face challenges in accurately assessing risk, ensuring fair loan approvals, and preventing fraud. On the other hand, borrowers often struggle with inconsistent lending criteria, outdated credit models, and transparency issues.

Let’s explore some of the biggest challenges and limitations that affect credit underwriting in India today.

1. Incomplete Credit Histories Still Impact Borrowers

Despite technological advancements, millions of Indians still struggle to get loans due to a lack of formal credit history. This issue is most common among:

  • First-time borrowers (students, young professionals).
  • Gig workers and freelancers with irregular incomes.
  • Small business owners who do not have well-documented financials.

Even though alternative credit scoring methods (such as analysing utility bill payments and digital transactions) are gaining traction, most banks and NBFCs still rely heavily on traditional credit scores. This means many deserving borrowers get rejected simply because they don’t fit into conventional risk models.

2. Over-reliance On Credit Scores Can Be Misleading

A high credit score does not always mean a borrower is financially responsible, and a low score does not always mean they are risky. Traditional credit scoring models have limitations, such as:

  • Not accounting for sudden financial improvements (e.g., a borrower may have struggled in the past but is now earning well).
  • Failing to consider alternate income sources (many people earn from side businesses, investments, or freelance work that doesn’t reflect in official income records).
  • Overlooking contextual factors (a missed EMI due to an emergency should not be weighed the same as habitual defaults).

This rigid scoring system often leads to unfair loan rejections, particularly for self-employed individuals and informal sector workers.

3. Inconsistent Lending Policies Across Lenders

There is no standard underwriting model followed across the lending industry. Each bank, NBFC, and fintech lender has its risk assessment framework, leading to inconsistencies in loan approvals.

For example:

  • One lender might approve a loan for a borrower with a 680 credit score, while another might reject them outright.
  • Some banks have strict income criteria, whereas digital lenders consider transaction behaviour instead.
  • Loan terms (interest rates, tenure, and fees) can vary widely for the same borrower based on the lender’s internal policies.

This lack of uniformity makes it difficult for borrowers to understand what they qualify for and why they were rejected.

4. Rising Loan Fraud And Identity Theft

With more lenders shifting to digital underwriting, fraudsters are finding new ways to manipulate the system. Some common fraud risks include:

  • Fake financial documents – Fraudulent salary slips, fake bank statements, and forged tax returns.
  • Identity theft – Using stolen Aadhaar and PAN details to apply for loans.
  • Loan stacking – Borrowers taking multiple loans from different lenders simultaneously before their credit reports update.

Although AI and data analytics help detect fraud patterns, many lenders still rely on traditional verification methods, making them vulnerable to sophisticated fraud schemes.

5. Bias In AI-Based Underwriting Models

AI and machine learning have made credit underwriting faster and more efficient, but they also come with risks—especially bias in decision-making.

  • AI models are trained on historical lending data, which means if past lending decisions were biased (e.g., rejecting self-employed borrowers more often), the AI might continue reinforcing those biases.
  • Some AI-driven underwriting systems lack transparency, making it difficult for borrowers to challenge loan rejections.
  • Borrowers from lower-income groups or rural areas may be unfairly categorised as high-risk, simply because they don’t have enough digital financial data.

Without proper regulation, AI-based lending can become just as unfair as traditional underwriting, if not worse.

6. Regulatory Uncertainty And Changing RBI Guidelines

The Reserve Bank of India (RBI) frequently updates lending regulations to prevent excessive risk-taking and consumer exploitation. While these changes are necessary, they create challenges for lenders who must constantly adapt their underwriting models.

Some recent regulatory shifts that have impacted underwriting include:

  • Stricter personal loan guidelines to prevent over-lending.
  • Mandatory fortnightly credit reporting to reduce risk from multiple loans.
  • Tighter regulations for digital lenders and BNPL (Buy Now, Pay Later) providers to protect borrowers.

While these changes improve financial stability, they also make it harder for lenders to create a consistent underwriting framework, especially fintech startups that rely on digital credit models.

Conclusion

Credit underwriting in India has evolved significantly, shifting from manual paperwork-based approvals to AI-driven, data-driven decision-making. Today, lenders use a mix of traditional credit scores, alternative data sources, and AI-based risk models to assess borrowers. While these advancements have made loan approvals faster and more accessible, challenges such as credit exclusions, fraud risks, and regulatory uncertainty still persist.

For borrowers, understanding how underwriting works can help improve creditworthiness and increase loan approval chances. Meanwhile, for lenders, embracing transparency, standardised risk models, and fair lending practices will be key to ensuring a sustainable lending ecosystem.

By Abhinandan, ago
How to download PF statement

Download PF Statement Online In 5 Easy Steps

What Is An EPF Statement?

An EPF statement, commonly referred to as an EPF passbook, is an official record that tracks all transactions related to an employee’s Employees’ Provident Fund (EPF) account. This document is updated periodically and allows employees to monitor their contributions, withdrawals, and interest earnings.

A PF statement is particularly useful for employees who want to:

  • Check their current EPF balance
  • Track monthly employer and employee contributions
  • Monitor interest earned on their EPF deposits
  • Validate past transactions, including withdrawals and transfers
  • Ensure that their employer is making timely contributions

The EPF passbook is available online through the EPFO Member e-Sewa portal and the UMANG mobile app, making it accessible at any time.

What Details Does A PF Statement Include?

A PF statement consists of multiple sections, each containing valuable details about an employee’s EPF contributions and account transactions. Here’s what you can find in your EPF passbook:

1. Personal Information

  • Employee Name – As registered in the EPFO database.
  • Universal Account Number (UAN) – A unique identifier for all EPF-related transactions.
  • PF Account Number – A unique number assigned to the employee’s PF account.
  • Employer Name – The name of the organisation contributing to the EPF account.
  • Date of Joining the EPF Scheme – The date when the employee’s contributions began.

2. EPF Contribution Details

  • Employee Contribution – The amount deducted from the employee’s salary (typically 12% of the basic salary).
  • Employer Contribution – The employer’s contribution to the EPF account (12% of basic salary, with 8.33% directed to EPS).
  • Total Contribution – The sum of both employee and employer contributions.

3. Interest Earned

  • Interest on EPF Balance – The amount of interest credited to the account, calculated annually.
  • Interest Rate Applied – The interest rate set by EPFO for the financial year.

4. Transaction History

  • Monthly Contributions – A breakdown of contributions made each month.
  • Withdrawals – Any partial or full withdrawals made from the EPF account.
  • Transfers – If the PF balance was transferred from a previous employer’s account.

5. EPS (Employees’ Pension Scheme) Contribution

  • Employer’s EPS Contribution – The portion of the employer’s contribution allocated to the Employees’ Pension Scheme (EPS).
  • Total Pensionable Service – The number of years the employee has contributed to the EPS.
  • Pensionable Salary – The salary amount considered for pension calculations.

6. Nominee Details

  • Nominee Name – The individual nominated by the employee to receive the PF amount in case of unforeseen circumstances.

7. Withdrawal & Taxation Information

  • TDS Deduction – If applicable, details of tax deducted on premature withdrawals.
  • Withdrawal Status – Status of any withdrawal request submitted through the EPFO portal.

By reviewing the PF statement, employees can ensure that their employer is making timely contributions and can also plan for future withdrawals or retirement savings.

How To Download A PF Statement Using The EPFO Member Portal?

The EPFO Member e-Sewa portal is the most common and reliable way to download a PF statement. This portal provides employees with direct access to their EPF passbook, allowing them to track their contributions, interest earnings, and transaction history in a few simple steps.

To download your EPF passbook using the EPFO Member Portal, follow the step-by-step guide below:

Step 1: Visit the EPFO Member Portal

Go to the official EPFO e-Sewa portal by visiting https://unifiedportal-mem.epfindia.gov.in.

EPFO portal

Step 2: Log In with Your UAN and Password

  • Enter your Universal Account Number (UAN) and password.
  • Complete the CAPTCHA verification and click on the Sign In button.
  • If you haven’t activated your UAN, click on “Activate UAN”, enter the required details, and follow the verification process.

Step 3: Access the ‘View Passbook’ Option

  • Once logged in, navigate to the “Passbook” section on the dashboard.
  • Click on the “Download Passbook” option to proceed.

Step 4: Select Your PF Account

  • If you have worked for multiple employers, select the relevant PF account number for which you wish to download the EPF statement.
  • The system will retrieve the transaction details linked to the selected account.

Step 5: Download the EPF Statement

  • Click on the “Download” or “Print” option to save the passbook as a PDF file.
  • You can now view, print, or share the PF statement as required.

Important Notes:

✔️ The EPF passbook is only accessible if your employer has filed the Electronic Challan cum Return (ECR) for your contributions.
✔️ The EPFO portal does not display real-time updates, and transactions are reflected after a certain period.
✔️ Ensure your UAN is linked with Aadhaar, PAN, and bank account details to access the statement without issues.

The EPFO Member Portal remains one of the easiest ways to download a PF statement, allowing employees to track their contributions at any time.

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How To Download A PF Statement Using The UMANG App?

The UMANG (Unified Mobile Application for New-age Governance) app is an official mobile application developed by the Government of India, enabling users to access various government services, including the Employees’ Provident Fund (EPF) passbook download. It is a convenient alternative to the EPFO Member Portal, allowing employees to check their EPF balance and download their statements directly from their smartphones.

To download your PF statement using the UMANG app, follow these simple steps:

Step 1: Download and Install the UMANG App

Step 2: Log In or Register on the UMANG App

  • If you are a new user, you will need to register using your mobile number and create an MPIN for future logins.
  • If you are an existing user, enter your registered mobile number and MPIN to log in.

Step 3: Search for EPFO Services

  • On the UMANG home screen, type “EPFO” in the search bar.
  • Select “Employee Centric Services” from the results.
  • Click on “View Passbook” to proceed.

Step 4: Enter Your UAN and OTP Verification

  • Enter your Universal Account Number (UAN).
  • An OTP (One-Time Password) will be sent to your registered mobile number linked with UAN.
  • Enter the OTP to authenticate and access your EPF details.

Step 5: Select the PF Account and Download the Statement

  • If you have multiple PF accounts (from previous employers), select the relevant one.
  • The EPF passbook will be displayed on the screen, showing all contributions, interest, and transaction details.
  • Click on the “Download” or “Print” option to save the statement as a PDF file.

Benefits Of Using The UMANG App For PF Statement Download

✔️ Mobile-Friendly – No need for a computer; access your PF details anytime, anywhere.
✔️ OTP-Based Login – No need to remember passwords; secure authentication using OTP.
✔️ Quick and Easy – Download your PF statement in just a few taps.
✔️ Supports Multiple Services – Apart from EPF, the UMANG app also provides access to Aadhaar, PAN, and other government services.

The UMANG app is an excellent option for employees who prefer accessing their PF statement on the go without logging into a website.

How To Download A PF Statement Via SMS And Missed Call?

For employees who do not have access to the EPFO Member Portal or UMANG app, the Employees’ Provident Fund Organisation (EPFO) offers a simpler way to check their EPF balance and receive key account details via SMS and missed call services. While these methods do not allow downloading a detailed EPF statement, they provide a quick balance check without needing internet access.

Checking EPF Balance via SMS

The EPFO SMS service allows employees to receive their PF balance details directly on their mobile phones. This service is available to users who have:

✔️ An active Universal Account Number (UAN).
✔️ A mobile number linked to their UAN.
✔️ Their UAN is seeded with Aadhaar, PAN, or bank details.

Steps to Check EPF Balance via SMS

  1. Open your phone’s messaging app.
  2. Type the following message:
    EPFOHO UAN <Language Code>
    Example: If you want the message in English, type:
    EPFOHO UAN ENG
  3. Send the message to 7738299899 from your registered mobile number.

Language Codes for SMS Service

Language

Code

English

ENG

Hindi

HIN

Tamil

TAM

Telugu

TEL

Punjabi

PUN

Bengali

BEN

Malayalam

MAL

Marathi

MAR

After sending the SMS, you will receive a reply containing details of your EPF balance and the last contribution made by your employer.

Checking EPF Balance via Missed Call

Employees can also check their PF balance by giving a missed call to a designated EPFO number. This service is:

✔️ Free of cost (standard call charges may apply).
✔️ Available 24/7.
✔️ Requires an active UAN linked to Aadhaar, PAN, or bank account.

Steps to Check EPF Balance via Missed Call

  1. Dial +91-9966044425 from your registered mobile number.
  2. Let the call ring for a few seconds until it disconnects automatically.
  3. You will receive an SMS with your EPF balance details, including the latest contribution and total accumulated amount.

Key Differences Between SMS and Missed Call Services

Feature

SMS Service

Missed Call Service

Balance Check

Yes

Yes

Last Contribution Details

Yes

Yes

Language Options

Yes

No (Only in English)

Detailed Passbook Download

No

No

Internet Required?

No

No

While both methods do not provide a downloadable EPF statement, they are excellent for quickly verifying your PF balance and contribution history. If you require a detailed PF statement, you should use either the EPFO Member Portal or the UMANG app.

Final Thoughts

Downloading your PF statement is an essential step in managing your retirement savings and financial planning. Whether you prefer the EPFO Member Portal, UMANG app, or SMS/Missed Call services, there are multiple ways to access your EPF passbook conveniently.

If you encounter any issues while downloading your statement, ensure that your UAN is activated, Aadhaar/PAN is linked, and employer contributions are up to date. For unresolved issues, you can contact the EPFO helpline or visit your nearest EPFO office for assistance.

By Abhinandan, ago
KYC for high risk customers

KYC For High-Risk Customers: All You Need To Know

Who Are High-Risk Customers?

Not all customers carry the same level of risk. Some individuals or businesses present greater financial, legal, or reputational threats, making it essential for organisations to apply stricter scrutiny before engaging with them. High-risk customers aren’t just limited to fraudsters or criminals—they can also include legitimate businesses or individuals operating in industries with tighter regulations, high transaction volumes, or international dealings.

Who Falls Into the High-Risk Customer Category?

A high-risk customer is someone who, based on their profile or transaction patterns, could expose a business to financial loss, fraud, or regulatory penalties. While most customers undergo a basic Know Your Customer (KYC) process, those identified as high-risk require Enhanced Due Diligence (EDD) to ensure transparency and compliance.

Here are some common examples of high-risk customers:

  • Politically Exposed Persons (PEPs): Government officials, diplomats, or their close associates who could be vulnerable to bribery or corruption.
  • Sanctioned Individuals & Entities: Those flagged by regulatory bodies like OFAC (Office of Foreign Assets Control) or the United Nations sanctions list due to suspected illegal activities.
  • Businesses in High-Risk Countries: Organisations operating in nations identified as havens for money laundering, financial crime, or weak regulatory enforcement (e.g., FATF-listed jurisdictions).
  • Industries Prone to Financial Crime: This includes crypto exchanges, gambling platforms, arms trading, and cash-intensive businesses that require closer monitoring.
  • Customers with Suspicious Transaction Patterns: Individuals making frequent large-value transactions, irregular deposits, or unexplained cash movements.
  • Anonymous or Multi-Account Holders: Customers who try to mask their identity, use fake credentials, or operate multiple accounts under different names.

Regulatory Requirements For High-Risk Customer KYC

Managing high-risk customers is an essential modern-day legal obligation. Regulatory authorities across the globe mandate strict KYC and Anti-Money Laundering (AML) measures to ensure businesses do not inadvertently facilitate financial crimes. Non-compliance can result in hefty fines, loss of operating licenses, and reputational damage.

Financial institutions and regulated businesses must align their KYC procedures with legal frameworks set by national and international bodies such as:

  • Financial Action Task Force (FATF): A global regulatory body that sets standards to combat money laundering and terrorism financing.
  • Reserve Bank of India (RBI) & SEBI (India): Mandate stringent KYC norms for banks, NBFCs, and fintech companies.
  • European Union’s Anti-Money Laundering Directives (AMLD): Outlines AML and KYC compliance requirements for financial institutions.
  • Office of Foreign Assets Control (OFAC – US): Enforces economic sanctions against high-risk individuals and entities.
  • Financial Conduct Authority (FCA – UK): Ensures that UK-based financial firms implement effective AML and KYC measures.
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Why High-Risk Customers Require Enhanced Due Diligence (EDD)?

Basic KYC checks—such as identity verification and address proof—aren’t enough for high-risk customers. Businesses must apply Enhanced Due Diligence (EDD), which involves deeper investigation, continuous monitoring, and additional risk assessment measures.

Key Components of EDD for High-Risk Customers

  1. Detailed Identity Verification: Businesses must verify high-risk customers using multiple sources, including government-issued IDs, biometric verification, and forensic document analysis.
  2. Adverse Media Screening: Checking for negative news, legal cases, or mentions in crime-related databases to assess reputational risks.
  3. Source of Funds & Wealth Verification: Understanding where the customer’s money comes from, especially for large transactions, to detect money laundering attempts.
  4. Sanction & Watchlist Screening: Identifying individuals or businesses flagged by Interpol, UN sanctions lists, and national financial crime units.
  5. Continuous Transaction Monitoring: High-risk customers require ongoing scrutiny, with AI-powered systems detecting unusual patterns in real-time.
  6. Regular KYC Updates: Unlike low-risk customers who undergo KYC renewal every few years, high-risk customers require more frequent reassessments.

Challenges in High-Risk Customer KYC & How to Overcome Them

Identifying and managing high-risk customers is one of the biggest challenges for financial institutions, fintech companies, and other regulated businesses. With increasing regulatory scrutiny, sophisticated fraud tactics, and evolving financial crime methodologies, businesses must stay vigilant and constantly refine their Know Your Customer (KYC) framework.

High-risk customers can be difficult to detect, as they often appear legitimate at first glance. They may manipulate identity documents, obscure the source of funds, or engage in layered transactions to bypass scrutiny. This makes it critical for organisations to go beyond standard KYC procedures and implement advanced risk assessment strategies.

Key Challenges in High-Risk Customer KYC

1. Difficulty in Identifying High-Risk Individuals and Entities

Not all high-risk customers exhibit obvious red flags. Some use shell companies, proxies, or offshore accounts to mask their true identity and financial activities.

  • Example: A politically exposed person (PEP) may conduct transactions through an intermediary business or a relative’s account to avoid direct association with funds.
  • Challenge: Without thorough due diligence, such customers can slip through standard KYC checks and pose serious financial crime risks.

Solution:

  • Conduct deep background checks using global PEP and sanction databases.
  • Perform adverse media screening to detect past legal disputes, financial misconduct, or corruption allegations.
  • Use AI-powered identity verification to flag inconsistencies in personal or business details.

2. Regulatory Compliance Complexity & Ever-Changing KYC Laws

Financial regulations differ across jurisdictions, making it difficult for global businesses to maintain a uniform KYC standard. Organisations operating in multiple countries must comply with various frameworks such as:

  • Financial Action Task Force (FATF) guidelines on anti-money laundering (AML).
  • European Union’s AML Directives (AMLD), including the 6th AML Directive.
  • Reserve Bank of India (RBI) and SEBI KYC norms for financial institutions.
  • OFAC (US), FCA (UK), and AUSTRAC (Australia) regulations for high-risk entities.

Staying compliant requires continuous updates to KYC policies, risk models, and verification procedures.

Solution:

  • Automate regulatory compliance using RegTech solutions that update KYC policies in real time.
  • Conduct internal audits and training programs to ensure teams are aware of the latest compliance requirements.
  • Integrate multi-jurisdictional KYC databases to streamline verification across global markets.

3. Sophisticated Fraud Tactics & Evolving Money Laundering Schemes

Fraudsters are becoming more advanced, using AI-generated fake identities, deepfake videos, and synthetic identity fraud to bypass traditional KYC checks. Criminals also engage in complex money laundering schemes such as:

  • Structuring/Smurfing: Breaking large transactions into smaller ones to avoid detection.
  • Trade-Based Money Laundering (TBML): Using trade invoices to disguise illicit money movement.
  • Cryptocurrency Laundering: Converting illegal funds into digital assets for anonymity.

Solution:

  • Implement AI-driven fraud detection models that analyse behavioural patterns.
  • Use biometric verification and liveness detection to prevent deepfake identity fraud.
  • Monitor high-risk transactions using real-time anomaly detection systems.

4. High Operational Costs of Enhanced Due Diligence (EDD)

Conducting Enhanced Due Diligence (EDD) on high-risk customers requires significant investment in:

  • Advanced verification technologies (AI, machine learning, and blockchain KYC).
  • Dedicated compliance teams to manually review flagged cases.
  • Continuous customer monitoring systems to track financial activities over time.

For many businesses, the cost of compliance outweighs the potential risk, leading to gaps in their high-risk KYC process.

Solution:

  • Adopt risk-based customer segmentation to allocate resources efficiently (higher risk = deeper verification).
  • Use automated KYC workflows to streamline document collection, screening, and risk scoring.
  • Leverage outsourced verification services to reduce operational costs without compromising compliance.

5. Lack of Standardised KYC Processes Across Industries

Different industries have different approaches to high-risk customer verification. For example:

  • Banks and NBFCs focus on AML, fraud detection, and financial risk mitigation.
  • Fintech and payment companies emphasise real-time KYC to onboard customers faster.
  • E-commerce and gaming platforms prioritise identity verification and fraud prevention.

This lack of standardisation makes it difficult to share risk intelligence across industries, leading to loopholes that fraudsters exploit.

Solution:

  • Promote cross-industry collaboration and data sharing through fraud consortiums and compliance networks.
  • Adopt global KYC standards such as ISO 20022 to enable interoperability between different verification systems.
  • Work with third-party KYC solution providers that offer compliance-ready verification frameworks.

Conclusion

As financial crimes adapt every day, businesses must stay ahead with advanced KYC solutions. The future of high-risk customer verification will be shaped by:

  • AI-Powered Risk Models: More businesses will shift to predictive analytics and AI-driven KYC, reducing manual intervention.
  • Decentralised Digital Identity Verification: Blockchain-based KYC solutions will eliminate the need for repeated identity verification.
  • Real-Time KYC & Instant Risk Scoring: Customers will be assessed in seconds using real-time data, reducing friction in onboarding.
  • Stronger Global Regulatory Collaboration: Governments and financial institutions will work together to combat cross-border financial crime.

Businesses that proactively invest in KYC innovation and compliance automation will be best positioned to navigate the complexities of high-risk customer management while ensuring security, trust, and regulatory adherence.

FAQs

Yes, as per RBI guidelines, Re-KYC is mandatory for high-risk customers at least once every two years to mitigate fraud and ensure compliance with AML regulations.

KYC Risk Rating is a classification system used by banks and financial institutions to assess a customer’s risk level based on factors like identity, financial activity, transaction behavior, and geography. In India, customers are categorized as low, medium, or high risk, with high-risk customers requiring enhanced due diligence (EDD) and more frequent Re-KYC as per RBI’s AML/CFT guidelines.

In India, high-risk customers include individuals or entities with a higher likelihood of money laundering, fraud, or financial crimes. As per RBI guidelines, high-risk customers typically include:

  1. Politically Exposed Persons (PEPs) – Domestic and foreign officials with significant influence.
  2. Non-Resident Indians (NRIs) and Offshore Entities – Especially those from tax havens.
  3. High-Value Transaction Customers – Individuals or businesses with large, unusual, or suspicious transactions.
  4. Cash-Intensive Businesses – Like casinos, real estate firms, jewelry traders, and money service providers.
  5. Customers from High-Risk Jurisdictions – Countries with weak AML/CFT regulations.
  6. Entities with Adverse Media Reports – Those linked to fraud, financial crimes, or regulatory scrutiny.

In India, Customer Due Diligence (CDD) for high-risk customers involves Enhanced Due Diligence (EDD) under the PMLA, RBI KYC Master Directions, SEBI, IRDAI, and FIU-IND regulations. It includes:

  1. Stricter KYC – Additional identity verification and beneficial ownership checks.
  2. Source of Funds Verification – Ensuring transaction legitimacy.
  3. Ongoing Monitoring – Tracking high-value/unusual transactions.
  4. Senior Management Approval – Mandatory for onboarding/continuation.
  5. Frequent KYC Updates – Regular risk-based reviews.

In India, as per the RBI’s Master Direction on KYC and Prevention of Money Laundering (PMLA) regulations, high-risk customers must undergo a KYC review and updation at least once every two years.

By Abhinandan, ago

Medium Risk Customer KYC: A Comprehensive Guide

Introduction

Know Your Customer (KYC) processes are critical for safeguarding the financial sector against fraud, money laundering, and terrorist financing. Medium-risk customers, positioned between high and low-risk classifications, require a nuanced approach to ensure both regulatory compliance and operational efficiency.

Criteria for Identification

  1. Geographic Factors: Customers operating in or transacting with countries that have moderate levels of corruption or political instability are often classified as medium risk.
  2. Industry and Business Activities: Those involved in industries that are not inherently high-risk but still have potential vulnerabilities, such as certain types of manufacturing or service industries, might fall into this category.
  3. Transaction Patterns: Moderate frequency and size of transactions, which are unusual but not excessively so, can indicate a medium risk level. This also includes fluctuating transaction volumes that don’t fit a predictable pattern.
  4. Customer Relationships: Relationships with entities or individuals in higher risk categories or regions can elevate a customer’s risk status.
  5. Economic Profile: Changes in the economic profile of a customer, such as rapid growth or sudden expansion into new markets, might warrant a mid-level risk classification due to the uncertainties involved.

The Importance of Accurate Classification Accurately identifying medium-risk customers is essential for applying the appropriate level of due diligence. Overlooking or misclassifying such customers can lead to regulatory repercussions and potential exposure to financial crimes.

Role of Enhanced Due Diligence (EDD) in Identifying Medium-Risk Customers

  • Comprehensive Background Checks: EDD involves in-depth background checks that go beyond basic identity verification. This includes scrutinizing past financial activities, checking against global watchlists, and investigating any links to adverse media coverage. For example, a customer involved in international trade may require checks against sanctions lists or foreign investment regulations.

  • Verification of Source of Funds: Understanding where a customer’s wealth and funds originate is crucial. This step might involve detailed analysis of business activities, financial statements, and transaction histories to ensure legitimacy. For instance, if a customer’s business suddenly expands operations into high-risk jurisdictions, EDD would assess the financial implications and origins of the funds used for this expansion.

  • Ongoing Transaction Monitoring: EDD for medium-risk customers also emphasizes the need for continuous monitoring of transaction behaviors. Setting up alerts for transactions that deviate from established patterns allows institutions to respond proactively to potential risks. For example, a series of high-value transactions over a short period may trigger additional checks to confirm the legitimacy of these transactions.

  • Sector-Specific Risk Analysis: Certain industries may carry inherent risks even if they don’t appear inherently suspicious. EDD takes a closer look at the sectors in which the customers operate, evaluating typical activities and associated risk factors. A customer operating within the real estate sector, known for its vulnerabilities to money laundering, would be subjected to additional scrutiny regarding property transactions.

  • Geographical Risk Assessment: Customers operating in or transacting with countries having moderate risk ratings require a nuanced analysis of the geographical risk. EDD assesses the political stability, economic environment, and regulatory landscape of these countries to tailor the due diligence process accordingly.

Through these measures, EDD ensures that financial institutions effectively manage the risks associated with medium-risk customers, thereby safeguarding against potential financial crimes while maintaining regulatory compliance.

Technological Integration in KYC

Technological advancements are transforming KYC (Know Your Customer) by enhancing accuracy and efficiency. Integration of technologies like AI, machine learning, and blockchain facilitates comprehensive data analysis, secure transaction tracking, and real-time monitoring.

  • Artificial Intelligence and Machine Learning: These technologies automate the identification and risk assessment processes by analyzing vast amounts of data to detect patterns and anomalies quickly and accurately.

  • Blockchain: It offers a decentralized and immutable ledger, ensuring the integrity and security of customer data across different parties without compromising privacy.

  • Biometric Verification: Advanced biometrics, including facial recognition and fingerprint scanning, are being used to enhance the security and reliability of customer verification processes.

  • Digital Onboarding: Streamlines the customer onboarding process, making it faster and more user-friendly while ensuring compliance with regulatory standards.

Ongoing Monitoring and Compliance for Medium-Risk Customers

  1. Enhanced Transaction Monitoring:

    • Implement advanced algorithms to detect unusual patterns and potential red flags in transactions.
    • Customize monitoring systems to track specific risk indicators related to medium-risk customers, such as sudden increases in transaction volume or transactions with high-risk jurisdictions.

  2. Periodic Risk Re-evaluation:

    • Schedule regular intervals (e.g., annually or bi-annually) to reassess the risk profiles of medium-risk customers.
    • Adjust risk levels based on new business activities, changes in political or economic stability of connected regions, or modifications in customer behavior.

  3. Compliance Training and Awareness:

    • Conduct regular training sessions for staff on the latest compliance regulations and emerging risks.
    • Ensure that all employees involved in KYC processes understand the specific requirements and procedures for managing medium-risk customers.

  4. Regulatory Alignment and Updates:

    • Stay updated with global and local regulatory changes that affect KYC practices.
    • Integrate regulatory feedback into ongoing risk management strategies to ensure compliance and adapt to new guidelines.

  5. Use of Regulatory Technology (RegTech):

    • Leverage RegTech solutions to streamline compliance processes, from monitoring to reporting, ensuring accuracy and efficiency.
    • Implement systems that provide real-time data analysis and reporting capabilities to quickly adapt to new threats or changes in a customer’s risk profile.

Regulatory Compliance and Best Practices in KYC for Medium-Risk Customers

Ensuring regulatory compliance while managing medium-risk customers involves a thorough understanding of both global and local regulatory standards, which dictate the necessary due diligence and monitoring processes. Here are some best practices:

  1. Adopt a Risk-Based Approach: Tailor KYC processes to reflect the specific risk level of each customer, focusing resources where they are most needed.

  2. Stay Informed of Regulatory Changes: Regularly update procedures to align with the latest compliance regulations, enhancing the institution’s ability to respond to new regulatory demands.

  3. Implement Comprehensive Policies: Develop clear policies and procedures that outline the steps for identifying, assessing, and monitoring medium-risk customers.

  4. Leverage Technology: Use advanced technologies to enhance the efficiency and effectiveness of KYC processes, ensuring accurate and timely compliance.

  5. Regular Training: Ensure that staff are continuously trained on the latest KYC regulations and best practices, maintaining a high level of compliance awareness and expertise.

Conclusion

Managing KYC for medium-risk customers is a dynamic process that balances rigorous compliance with efficient customer service. By leveraging technology and implementing strategic monitoring, financial institutions can effectively manage these customers, ensuring a secure financial environment and fostering trust without compromising service quality.

FAQ

Medium-risk customers typically exhibit characteristics that fall between low and high-risk categories, such as moderate transaction sizes, business activities in or dealings with moderately risky countries.

Periodic reviews should be conducted annually or bi-annually, depending on the institution’s policy and any significant changes in the customer’s profile or business activities.

Enhanced due diligence might include more detailed financial information, a deeper examination of business relationships, and more rigorous transaction monitoring.

Advanced technologies like AI and machine learning can automate and enhance the detection of unusual patterns, making the monitoring process more efficient and effective.

By Siddharth, ago
Customer Onboarding in Gaming Industry

Customer Onboarding In Online/Real-Money Gaming: Challenges & Best Practices

The real money gaming industry in India is seeing millions of players signing up to try their luck in online casinos, poker, rummy, fantasy sports, and other gaming platforms. With the Indian gaming market projected to hit $ 9.2 billion by FY29 according to a report, this fast growth comes with the challenge of ensuring that only genuine players enter the system while keeping fraudsters out.

A smooth and secure onboarding process is the first step in building trust between a gaming platform and its players. But it’s not just about making sign-ups easy—it’s also about adhering to the strict laws around identity verification, preventing fraud, and ensuring responsible gaming. If the onboarding process is too complicated, players may leave before even making their first deposit. On the other hand, if security checks are weak, platforms risk financial fraud, money laundering, and legal troubles.

Challenges In Customer Onboarding For Real Money Gaming Platforms

Customer onboarding in real money gaming is not as simple as just signing up with an email and password. Companies need to ensure that every new player is genuine, meets legal requirements, and is not a fraudster trying to exploit the system. This is where the real challenges begin.

1. Balancing Security with a Smooth User Experience

One of the biggest challenges in onboarding is ensuring security without making the process frustrating for players. Players may abandon the platform before completing registration if the KYC process is too lengthy or requires too many documents. On the other hand, if onboarding is too easy with minimal checks, fraudsters and underage players may slip through.

2. Preventing Fraud and Identity Theft

Real-money gaming platforms attract fraudsters who try to create multiple accounts using fake or stolen identities. This can lead to bonus abuse, match-fixing, money laundering, and other illegal activities. If a gaming company fails to detect fraudulent accounts early, it can suffer significant financial losses and reputational damage.

3. Meeting Regulatory Compliance

Gaming laws in India are changing continuously, and companies must follow strict KYC and Anti-Money Laundering (AML) guidelines to operate legally. Different states have different gaming regulations, and platforms must ensure that only players from legally allowed regions are onboarded. Failure to comply can result in heavy fines or even platform shutdowns.

4. Handling High Drop-Off Rates During Onboarding

A slow or complicated onboarding process often leads to high drop-off rates, meaning potential players leave before completing their registration. Players expect a fast and hassle-free experience, and any delays—such as slow document verification or multiple authentication steps—can frustrate them and push them toward competitors with smoother onboarding.

5. Verifying Players from Diverse Demographics

Real-money gaming attracts players from all backgrounds—students, professionals, casual gamers, and even high-net-worth individuals. Some may not have traditional documents like PAN cards or Aadhaar readily available, making verification tricky. Gaming platforms must cater to all demographics while maintaining strong KYC standards.

The Role Of KYC In Online Gaming Onboarding

Know Your Customer (KYC) is the pillar of a secure and compliant onboarding process in real money gaming. It helps gaming platforms verify the identity of players, prevent fraudulent activities, and comply with legal regulations. Without a strong KYC process, platforms risk losing credibility, facing financial fraud, and violating gaming laws.

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Why Is KYC Important for Online Gaming?

  1. Prevents Fraud and Identity Theft
    KYC helps ensure that every player signing up is who they claim to be. Fraudsters often use fake IDs, and stolen credentials, or create multiple accounts to exploit bonuses or launder money. By verifying player identities during onboarding, platforms can block suspicious accounts early.
  2. Ensures Compliance with Indian Gaming Regulations
    Real-money gaming platforms must comply with regulatory requirements, such as verifying a player’s age, identity, and location. KYC ensures that only players who meet the legal gaming age and reside in allowed states can access the platform, helping companies avoid regulatory penalties.
  3. Reduces Chargebacks and Payment Fraud
    Without proper KYC, fraudsters can use stolen credit cards or fake payment details to deposit money and later dispute transactions, leading to chargebacks. Strong identity verification prevents such fraudulent financial activities, saving gaming companies from revenue losses.
  4. Promotes Responsible Gaming
    Responsible gaming is a major concern in the industry. Many platforms must track player activity to prevent gambling addiction and underage gaming. KYC enables platforms to verify players’ ages and implement safeguards like deposit limits for minors or high-risk individuals.
  5. Builds Trust and Credibility
    Players feel more secure when they know that a platform follows proper KYC checks. It assures them that they are playing in a fair and well-regulated environment, increasing their trust in the platform.

How KYC Works In Online Gaming Onboarding

A standard KYC process involves:

  • Identity Verification – Players submit a government-issued ID (like Aadhaar, PAN, or Passport) for verification.
  • Address Verification – Some platforms require proof of address, like a utility bill, to ensure the player is from an allowed jurisdiction.
  • Age Verification – The system verifies that the player meets the legal age requirement for real-money gaming.
  • AML Screening – Players are checked against anti-money laundering databases to ensure they are not involved in financial crimes.
  • Face Match and Liveness Detection – Some platforms use biometric verification to confirm that the ID matches the player’s real face.

By integrating an automated KYC solution, gaming platforms can streamline these steps, reducing onboarding time from hours to just a few minutes while maintaining security and compliance.

Best Practices For A Smooth And Secure Onboarding Process

A well-designed onboarding process can make a significant difference in player retention, security, and compliance. If it’s too slow or complicated, players may abandon the platform before they even start playing. If it’s too lenient, fraudsters can exploit loopholes. Here are some best practices that real money gaming platforms should follow to create a seamless yet secure onboarding experience.

1. Automate KYC Verification for Speed and Accuracy

Manual verification is slow and prone to errors. Using an automated KYC solution speeds up the process by instantly verifying identity documents, conducting face matches, and checking for fraud risks. Players can complete registration in minutes instead of hours or days, improving their experience.

2. Enable a Frictionless User Journey

While security is critical, the onboarding process must be designed to feel effortless for players. Requesting only the essential information, providing real-time guidance on document uploads, and allowing for smooth mobile verification can reduce drop-offs. Multi-step onboarding, where KYC checks are triggered based on player activity (such as deposits above a certain amount), can also help strike a balance between security and ease of use.

3. Use AI-Powered Fraud Detection

AI-driven verification tools can detect suspicious patterns, such as multiple accounts created with slight variations of the same identity. Advanced fraud detection systems can flag high-risk players in real-time, preventing money laundering, bonus abuse, and account takeovers.

4. Comply with Local Regulations and Player Protection Laws

Gaming laws in India vary by state, and platforms must ensure that only players from legally permitted states can register. Geolocation verification, age checks, and AML screening are crucial for compliance. Gaming platforms must also stay updated with evolving laws to avoid legal troubles.

5. Implement Biometric and Liveness Verification

To prevent identity theft and fake accounts, platforms can use biometric checks like face match and liveness detection. This ensures that the player using the account is the same person who submitted the KYC documents, reducing impersonation fraud.

6. Offer Multiple Verification Options

Different players prefer different verification methods. Some may find document uploads inconvenient, while others may prefer Aadhaar-based e-KYC or OTP-based verification. Providing multiple ways to complete KYC can make onboarding smoother for a broader audience.

7. Educate Players on Why KYC Is Required

Some players may hesitate to share their personal documents due to privacy concerns. Clear communication about why KYC is necessary and how their data is protected can increase willingness to complete the process. Offering incentives, like small sign-up bonuses after successful verification, can also encourage compliance.

How Can AuthBridge Help Gaming Platforms with Seamless Onboarding

Real-money gaming platforms face the constant challenge of balancing security, compliance, and user experience. A slow or complicated onboarding process can drive players away, while weak verification measures can expose the platform to fraud and regulatory risks. This is where AuthBridge comes in, offering a seamless and automated solution to onboard players securely and quickly.

1. Instant Digital KYC for Fast and Hassle-Free Verification

AuthBridge’s AI-powered digital KYC solutions verify player identities in real-time, reducing onboarding time from hours to just a few minutes. By integrating Aadhaar-based e-KYC, PAN verification, and document OCR technology, gaming platforms can ensure compliance while delivering a smooth sign-up experience.

2. Advanced Fraud Detection and Risk Profiling

Gaming fraud is a major concern, from identity theft to multi-accounting and bonus abuse. AuthBridge’s AI-driven fraud detection scans for red flags, such as duplicate profiles, mismatched credentials, and suspicious transaction patterns, helping platforms block fraudulent users before they enter the system.

3. Face Match and Liveness Detection for Identity Protection

With increasing cases of identity fraud, ensuring that the person registering is the same as the one on the submitted ID is critical. AuthBridge’s Face Match and Liveness Detection technology prevents impersonation fraud by verifying the player’s real-time selfie against their official documents.

4. Location and Age Verification for Regulatory Compliance

Gaming laws in India vary by state, making geolocation-based verification essential for restricting access in legally restricted areas. Additionally, age verification ensures that only players who meet the legal age requirement can participate in real-money gaming. AuthBridge’s automated systems help gaming platforms comply with these regulations effortlessly.

5. AML Screening to Prevent Money Laundering

Money laundering is a serious risk in online gaming. AuthBridge provides AML screening and cross-checks player details against global watchlists, sanction lists, and politically exposed persons (PEP) databases. This ensures that gaming companies do not unknowingly onboard high-risk individuals.

6. Seamless API Integration for a Frictionless User Experience

AuthBridge’s plug-and-play APIs allow gaming platforms to integrate verification solutions directly into their apps and websites without disrupting the user journey. The process is mobile-first, ensuring smooth onboarding on any device, whether desktop or smartphone.

By leveraging AuthBridge’s end-to-end onboarding solutions, gaming companies can:

  • Reduce drop-offs with a smooth, hassle-free KYC process
  • Enhance security by blocking fraudulent users before they enter the platform
  • Stay compliant with evolving Indian gaming laws and global AML standards
  • Build player trust through fast, transparent, and reliable verification

AuthBridge enables gaming platforms to onboard players securely, boost retention, and stay ahead in a competitive industry—all while ensuring full regulatory compliance.

By Abhinandan, ago
Aadhaar Authentication private firms

Aadhaar Authentication Amendment 2025: Key Highlights

The Ministry of Electronics and Information Technology (MeitY) has announced the Aadhaar Authentication for Good Governance (Social Welfare, Innovation, Knowledge) Amendment Rules, 2025 under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits, and Services) Act, 2016. This amendment aims to make Aadhaar authentication more useful and accessible, not just for government services but also for private entities. The goal is to improve transparency, and inclusivity, and make it easier for people to access services while supporting better decision-making.

With India moving towards a more digital future, these changes will help people get services more easily and securely. It’s about making life simpler and safer, whether you’re dealing with government bodies or private businesses.

Expanding Aadhaar Authentication For Ease Of Living

The Aadhaar Authentication for Good Governance (Social Welfare, Innovation, Knowledge) Amendment Rules, 2025 significantly expands the scope of Aadhaar authentication. Earlier, Aadhaar was primarily used to access government subsidies, benefits, and services. With this amendment, both government and non-government entities can now use Aadhaar authentication to improve service delivery and promote ease of living.

This move enables industries like e-commerce, travel, tourism, hospitality, and healthcare to offer services more efficiently through Aadhaar-based verification. For example, it will simplify hotel check-ins, streamline online transactions, improve healthcare service access, and reduce the need for repetitive document submissions.

What’s more, the amendment targets creating a secure and trusted environment for both service providers and users. By allowing more entities to use Aadhaar authentication, the government is fostering a system where identity verification is quick, reliable, and helps prevent fraud. This change is expected to encourage innovation, enhance service quality, and support the development of digital solutions that benefit individuals and businesses alike.

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Streamlined Approval Process For Aadhaar Authentication Requests

To ensure that Aadhaar authentication is used responsibly and efficiently, the amendment introduces a more streamlined approval process for entities seeking to use this service. Any organisation, whether a government department or a private entity, must apply detailed information about their intended use of Aadhaar authentication.

Applications will be submitted through a dedicated portal to the relevant ministry or department of the Central or State Government. The Unique Identification Authority of India (UIDAI) will then review these applications to assess their purpose and compliance with regulations. Based on UIDAI’s recommendations, MeitY will grant the necessary approvals. Once approval is confirmed, the concerned ministry or department will notify the entity, authorising them to use Aadhaar authentication.

This structured approach ensures that Aadhaar authentication is only used for legitimate purposes that serve the public interest, such as enabling innovation, spreading knowledge, and improving access to services. It helps maintain the integrity of Aadhaar while allowing organisations to develop efficient, secure service delivery models.

Impact On Governance, Innovation, And Service Delivery

The amendment is expected to have a wide-ranging impact on governance, innovation, and service delivery in India. By broadening the scope of Aadhaar authentication, the government aims to foster an environment where technology can be leveraged for more efficient public and private services.

For governance, this means improved transparency and accountability. Government bodies can streamline administrative processes, reduce fraud, and ensure that subsidies and benefits reach the right individuals without delays.

In terms of innovation, businesses can create new digital products and services that rely on secure Aadhaar authentication. This could lead to development of advanced fintech solutions, health tech applications, and personalised e-commerce platforms that enhance user experience.

For individuals, the amendment translates into better access to essential services. Whether it’s quicker verification for banking, seamless onboarding for new jobs, or hassle-free travel bookings, Aadhaar authentication will simplify many day-to-day activities, making life more convenient and secure.

The Role of Identity Verification In The New Framework

As Aadhaar authentication becomes more widespread, the need for reliable identity verification processes becomes even more critical. This is where organisations specialising in background verification and digital identity verification solutions play an important role. By ensuring that the authentication process is secure, accurate, and compliant with regulations, these organisations help maintain the trust and efficiency of the entire system.

For instance, companies like AuthBridge provide comprehensive identity verification services that align with the goals of the Aadhaar amendment. Their expertise in background checks, digital KYC, and authentication solutions supports both government and private entities in delivering services securely and efficiently. As the use of Aadhaar expands, such verification services will be key to enhancing security, reducing fraud, and promoting trust in digital transactions.

Conclusion

The Aadhaar Authentication for Good Governance (Social Welfare, Innovation, Knowledge) Amendment Rules, 2025 is a significant step towards a more transparent, efficient, and inclusive digital ecosystem in India. By expanding the scope of Aadhaar authentication to both government and private entities, the amendment aims to improve service delivery, foster innovation, and enhance the ease of living for residents.

By Abhinandan, ago
Union Budget 2025-2026

Union Budget 2025-26: Key Highlights And Updates

Introduction

The Union Budget 2025-26, presented by the Honourable Finance Minister Smt. Nirmala Sitharaman marks a significant moment in India’s economic sojurn. With the theme of “Sabka Vikas” (inclusive growth), this budget is crafted to address the aspirations of a diverse population, spanning from middle-class households to large corporations. Quoting the renowned Telugu poet Gurajada Appa Rao, “A country is not just its soil; a country is its people,” the Finance Minister highlighted the government’s commitment to people-centric policies.

This budget reflects India’s ambition to accelerate towards Viksit Bharat (a developed India) by focusing on fiscal consolidation, economic resilience, and sustainable development. It highlights four key drivers of growth—Agriculture, Micro, Small and Medium Enterprises (MSMEs), Investments, and Exports—all aimed at fostering an environment that nurtures economic expansion and social welfare.

Key Tax Reforms And Implications For Individuals And Businesses

The Union Budget 2025-26 introduces significant tax reforms aimed at simplifying the tax structure, promoting voluntary compliance, and easing the financial burden on both individuals and businesses. With a clear focus on enhancing disposable income and fostering a business-friendly environment, the new tax proposals are designed to stimulate consumption, savings, and investment across the economy.

1. Income Tax Reforms

One of the most notable announcements in this budget is the revised income tax regime, which brings substantial relief to the middle class. The government has introduced a progressive tax structure where individuals with an annual income of up to ₹12 lakh will not be liable to pay any income tax, thanks to the new slabs and a standard deduction of ₹75,000. 

Tax slabs
Image Source: PIB.gov.in

This effectively means that salaried individuals earning up to ₹12.75 lakh annually will pay zero income tax, putting more money directly into the hands of millions of Indians.

Revised Income Tax Slabs (New Tax Regime):

Annual Income (₹)

Rate of Tax

0 – 4,00,000

NIL

4,00,001 – 8,00,000

5%

8,00,001 – 12,00,000

10%

12,00,001 – 16,00,000

15%

16,00,001 – 20,00,000

20%

20,00,001 – 24,00,000

25%

Above 24,00,000

30%

This new tax regime, in essence, will simplify compliance, making it easier for taxpayers to file returns without the complexities of multiple exemptions and deductions.

2. TDS and TCS Rationalisation

The budget proposes several changes to the Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) provisions to streamline tax collection and reduce compliance burdens:

  • TDS on Rent: The threshold for TDS on rental income has been increased from ₹2.4 lakh to ₹6 lakh per annum. This is a significant relief for individuals and small businesses, as it reduces the administrative hassle of managing TDS for smaller rental incomes.
  • Senior Citizens’ Interest Income: The limit for a tax deduction on interest income for senior citizens has been doubled from ₹50,000 to ₹1 lakh, providing additional tax relief to retirees and encouraging savings in fixed-income instruments.
  • Decriminalisation of TDS/TCS Delays: In a progressive move, the budget has decriminalised delays in the payment of both TDS and TCS. This aligns with the government’s broader agenda of reducing the fear of prosecution for minor compliance delays, fostering a more taxpayer-friendly environment.
Smt. Nirmala Sitharaman addressing a Post Budget Press Conference at National Media Centre, in New Delhi on February 01, 2025
Smt. Nirmala Sitharaman addressing a Post Budget Press Conference at National Media Centre, in New Delhi on February 01, 2025

3. Simplified Tax Compliance and Voluntary Disclosures

To promote voluntary compliance, the government has extended the time limit for filing updated income tax returns from the current two years to four years. This provides taxpayers with a longer window to correct errors or omissions in their original filings without facing severe penalties. Over 90 lakh taxpayers have already benefited from this provision in the past, reflecting its success in encouraging honest disclosures.

Additionally, the Vivad Se Vishwas Scheme, aimed at resolving tax disputes, has seen strong participation with nearly 33,000 taxpayers availing of its benefits. The continuation and expansion of such schemes highlight the government’s focus on reducing litigation and increasing trust between taxpayers and the administration.

4. Corporate Tax and Business-Friendly Initiatives

For businesses, especially start-ups and MSMEs, the budget offers a range of incentives designed to promote growth and investment:

  • Presumptive Taxation for Non-Residents: A new presumptive taxation regime has been introduced for non-resident entities providing services to Indian companies, particularly in the electronics manufacturing sector. This move simplifies tax calculations and encourages foreign businesses to invest in India.
  • Extension of Start-Up Benefits: The eligibility period for start-ups to avail of tax exemptions has been extended by five years, providing much-needed support to India’s vibrant start-up ecosystem. This extension is expected to encourage entrepreneurship and innovation across sectors.
  • Incentives for Sovereign Wealth and Pension Funds: To boost infrastructure investment, the budget has extended the deadline for investments in sovereign wealth funds and pension funds by five more years, until 31st March 2030. This move is likely to attract long-term capital into critical infrastructure projects.

5. Relief on Customs Duties and Import Tariffs

The budget also proposes several changes to customs duties to promote domestic manufacturing and reduce dependency on imports:

  • Exemption on Lifesaving Drugs: Basic Customs Duty (BCD) has been exempted from 36 lifesaving drugs used to treat cancer, rare diseases, and chronic conditions. This will make essential medicines more affordable for patients.
  • Boost to EV and Battery Manufacturing: To support the electric vehicle ecosystem, BCD exemptions have been extended to capital goods used for EV and mobile battery manufacturing. This is expected to reduce production costs and promote the adoption of clean energy technologies.
  • Duty Rationalisation for Exports: BCD has been reduced from 30% to 5% on frozen fish paste and from 15% to 5% on fish hydrolysate, supporting the seafood export industry and enhancing competitiveness in global markets.
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Sector-Specific Highlights: Agriculture, MSMEs, Investment, And Exports

The Union Budget 2025-26 strategically identifies four key engines of growth—Agriculture, Micro, Small and Medium Enterprises (MSMEs), Investments, and Exports—as the pillars driving India’s journey towards Viksit Bharat (a developed India). This section provides a comprehensive analysis of the sector-specific initiatives that reflect the government’s commitment to inclusive development, economic resilience, and global competitiveness.

1. Agriculture: Strengthening the Backbone of the Economy

Agriculture remains the cornerstone of India’s economy, employing nearly half of the workforce. Recognising its critical role, the budget introduces several transformative schemes aimed at increasing productivity, ensuring food security, and improving farmers’ incomes.

Key Initiatives:

  • Prime Minister Dhan-Dhaanya Krishi Yojana:
    This flagship programme will cover 100 districts identified as having low agricultural productivity. It focuses on crop diversification, post-harvest storage, irrigation improvement, and ensuring the availability of both short- and long-term credit facilities. The partnership with state governments will facilitate region-specific strategies to enhance agricultural resilience.
  • Mission for Aatmanirbharta in Pulses:
    A six-year mission focusing on key pulses—Tur, Urad, and Masoor—has been announced to achieve self-sufficiency in pulse production. Central agencies like NAFED and NCCF will procure these pulses from farmers for the next four years, ensuring stable market prices and income security.
  • Kisan Credit Card (KCC) Expansion:
    The loan limit under the KCC scheme has been increased from ₹3 lakh to ₹5 lakh, with a modified interest subvention scheme. This will enhance credit accessibility for small and marginal farmers, supporting agricultural investments and modernisation.
  • Comprehensive Programme for Fruits and Vegetables:
    To address post-harvest losses and improve value chains, the government has launched initiatives focusing on the fruit and vegetable sectors, alongside a National Mission on High-Yielding Seeds and a Five-Year Mission for Cotton Productivity.

2. MSMEs

MSMEs contribute significantly to India’s GDP, employment generation, and exports. Recognising their potential, the budget outlines a robust framework to enhance credit access, promote technological upgrades, and support entrepreneurial ventures.

Key Initiatives:

  • Enhanced Credit Guarantee Cover:
    The credit guarantee limit for MSMEs has been doubled from ₹5 crore to ₹10 crore, making it easier for small businesses to secure loans at favourable terms. This move aims to boost business expansion, particularly in the post-pandemic recovery phase.
  • New Scheme for First-Time Entrepreneurs:
    A dedicated scheme targeting 5 lakh women, Scheduled Castes, and Scheduled Tribes entrepreneurs will provide term loans of up to ₹2 crore over the next five years. This initiative is designed to promote inclusivity in entrepreneurship and support start-ups from underrepresented communities.
  • National Manufacturing Mission:
    Covering small, medium, and large industries, this mission aims to strengthen the ‘Make in India’ initiative. It focuses on enhancing manufacturing capabilities, encouraging technological innovation, and integrating Indian businesses into global supply chains.
  • Toy Manufacturing Promotion:
    In a bid to reduce dependency on imports, the government will support domestic toy manufacturers through subsidies and skill development programmes, reinforcing the ‘Made in India’ brand in global markets.

3. Investment

Investment is the cornerstone of sustainable economic growth. The budget outlines a multi-pronged strategy focusing on infrastructure development, human capital enhancement, and technological innovation to create a robust investment ecosystem.

Key Initiatives:

  • Atal Tinkering Labs:
    The budget proposes setting up 50,000 Atal Tinkering Labs in government schools over the next five years. These labs will foster a culture of innovation and scientific curiosity among students, preparing the next generation for emerging industries.
  • Centre of Excellence in Artificial Intelligence (AI):
    With an outlay of ₹500 crore, the government will establish an AI centre focused on education. This initiative aims to integrate advanced AI technologies into learning environments, enhancing digital literacy and research capabilities.
  • Urban Challenge Fund:
    A significant allocation of ₹1 lakh crore has been made for the ‘Cities as Growth Hubs’ programme. This fund will support urban redevelopment, improve water and sanitation infrastructure, and promote sustainable urbanisation.
  • Private Sector-Led R&D Initiatives:
    The budget allocates ₹20,000 crore for private sector-driven research, development, and innovation. This move aims to foster collaboration between academia, industry, and government, driving breakthroughs in technology, healthcare, and clean energy.
  • BharatNet for Digital Connectivity:
    To bridge the digital divide, broadband connectivity will be provided to all government secondary schools and primary health centres in rural areas, ensuring equitable access to digital resources.

4. Exports

Exports play a vital role in boosting foreign exchange reserves, creating jobs, and strengthening India’s position in the global economy. The budget outlines several measures to promote exports and integrate Indian businesses with international markets.

Key Initiatives:

  • Export Promotion Mission:
    A unified Export Promotion Mission will be launched, jointly driven by the Ministries of Commerce, MSME, and Finance. This mission will focus on helping MSMEs tap into global markets through financial assistance, capacity building, and marketing support.
  • BharatTradeNet (BTN):
    A new digital public infrastructure platform, BharatTradeNet, will be established to streamline international trade documentation and provide financing solutions. This will reduce red tape, enhance transparency, and improve the ease of doing business for exporters.
  • Infrastructure Upgradation for Exports:
    The budget proposes upgrading air cargo infrastructure, including facilities for high-value perishable horticulture produce. This will improve supply chain efficiency and reduce transit times for perishable goods.
  • Support for Domestic Electronics Manufacturing:
    To capitalise on Industry 4.0 opportunities, the government will support the domestic electronics industry through incentives, infrastructure development, and R&D support.

Reforms For Growth

Reforms are positioned as the fuel that powers these four growth engines. The budget continues the government’s focus on ease of doing business, regulatory simplification, and fiscal prudence.

  • Jan Vishwas Bill 2.0:
    The bill aims to decriminalise over 100 provisions in various laws, reducing legal hurdles for businesses and encouraging entrepreneurship.
  • Foreign Direct Investment (FDI) Liberalisation:
    The FDI limit in the insurance sector has been raised from 74% to 100%, aimed at attracting foreign capital and promoting growth in the financial services sector.
  • Light-Touch Regulatory Framework:
    A high-level committee will be established to review non-financial sector regulations, with recommendations expected within a year. This framework aims to balance regulatory oversight with the need for business agility.
  • Investment Friendliness Index:
    To encourage healthy competition among states, an Investment Friendliness Index will be launched in 2025. This index will evaluate states based on ease of doing business, infrastructure, and investment policies.

Fiscal Consolidation And Budgetary Estimates

The budget reaffirms the government’s commitment to fiscal discipline, with a clear roadmap to reduce the fiscal deficit and maintain macroeconomic stability.

  • Fiscal Deficit Targets:
    The fiscal deficit for FY 2024-25 is estimated at 4.8% of GDP, with a target to bring it down to 4.4% in FY 2025-26. This reflects a balanced approach towards growth and fiscal prudence.
  • Revised Estimates for 2024-25:
    • Total Receipts (Excluding Borrowings): ₹31.47 lakh crore
    • Net Tax Receipts: ₹25.57 lakh crore
    • Total Expenditure: ₹47.16 lakh crore
    • Capital Expenditure: ₹10.18 lakh crore
  • Budget Estimates for 2025-26:
    • Total Receipts (Excluding Borrowings): ₹34.96 lakh crore
    • Net Tax Receipts: ₹28.37 lakh crore
    • Total Expenditure: ₹50.65 lakh crore

Key Takeaways From The 2025 Union Budget

  1. Middle-Class Relief: Significant tax cuts, zero tax liability for incomes up to ₹12 lakh, and increased deductions for senior citizens.
  2. Boost to MSMEs: Enhanced credit guarantees, support for first-time entrepreneurs, and initiatives to promote domestic manufacturing.
  3. Agricultural Reforms: Increased Kisan Credit limits, focus on pulses self-sufficiency, and comprehensive rural development programmes.
  4. Investment in Innovation: Allocations for AI, R&D, urban development, and digital connectivity to drive India’s technological growth.
  5. Ease of Doing Business: Decriminalisation of minor tax offences, simplified compliance, and promotion of voluntary disclosures.
  6. Exports & Global Integration: Support for MSME exports, infrastructure upgrades for air cargo, and reduction of customs duties on key commodities.

Conclusion

The Union Budget 2025-26 at its core, reflects a balanced approach—providing substantial tax relief to the middle class, fostering entrepreneurship through MSME support, strengthening the agricultural backbone, and fuelling investments in infrastructure, technology, and innovation. The recognition of **four growth engines—Agriculture, MSMEs, Investments, and Exports—**demonstrates the government’s strategic vision to diversify economic drivers and ensure resilience against global uncertainties.

FAQs around Union Budget 2025-2026

New Income Tax Slabs for 2025-26 (New Regime):

  • Up to ₹4 lakh – 0% (No tax)
  • ₹4 lakh to ₹8 lakh – 5%
  • ₹8 lakh to ₹12 lakh – 10%
  • ₹12 lakh to ₹16 lakh – 15%
  • ₹16 lakh to ₹20 lakh – 20%
  • ₹20 lakh to ₹24 lakh – 25%
  • Above ₹24 lakh – 30%

Standard Deduction: Increased to ₹75,000.
Tax-Free Income Limit: Up to ₹12.75 lakh after deductions.

Yes, the Union Budget 2025-26 announced an increase of 6,500 seats in Indian Institutes of Technology (IITs), focusing on those established after 2014.

The Union Budget 2025-26 focused on tax reforms, infrastructure, and inclusive growth. Income tax slabs have been revised with no tax up to ₹4 lakh and a 30% rate above ₹24 lakh, while the standard deduction is increased to ₹75,000, making income up to ₹12.75 lakh tax-free. The budget allocates ₹11.2 trillion for capital expenditure, targets a fiscal deficit of 4.4% of GDP, and projects 10.1% nominal GDP growth. Key announcements include 6,500 new IIT seats, 10,000 medical seats, a ₹10,000 crore startup fund, increased FDI in insurance (100%), and missions to boost pulses and cotton production. Defense gets ₹6.81 lakh crore, with added focus on MSME support, renewable energy, and middle-class relief.

In the Union Budget 2025-26, several items have become cheaper due to customs duty reductions. Lifesaving drugs, including 36 critical medicines, are now exempt from basic customs duties. Motorcycles have lower duties, with 40% for engines up to 1600cc and 30% for larger ones. Export duty on crust leather has been removed, and duties on jewelry and platinum findings are reduced to 20% and 5%, respectively. Additionally, imported furniture and key electronic components, including mobile parts, have seen duty cuts, making them more affordable.

In the Union Budget 2025-26, there are no changes to the old tax regime in terms of tax slabs or deductions. However, taxpayers under the new regime benefit from increased tax rebates. A key update is the rebate for incomes up to ₹12 lakh, ensuring zero tax liability after deductions. For salaried individuals, the standard deduction has increased to ₹75,000, effectively making income up to ₹12.75 lakh tax-free. These changes apply only to the new regime, while the old regime remains unchanged.

Income up to ₹12 lakh is effectively tax-free under the new tax regime due to a combination of revised tax slabs and an enhanced rebate. Here’s how it works:

  1. Revised Tax Slabs:

    • 0–4 lakh: 0% (no tax)
    • 4–8 lakh: 5%
    • 8–12 lakh: 10%

  2. Full Rebate: A tax rebate has been introduced for income up to ₹12 lakh. This means even if tax is calculated based on the slabs, the rebate cancels out the tax liability, making it effectively zero.

  3. Standard Deduction: For salaried individuals, an additional ₹75,000 standard deduction applies, increasing the effective tax-free limit to ₹12.75 lakh.

This rebate ensures that while tax is technically computed, it’s offset completely, resulting in zero tax payable for income up to ₹12 lakh.

In the Union Budget 2025-26, the standard deduction has been increased from ₹50,000 to ₹75,000 for salaried individuals and pensioners. This increase effectively raises the tax-free income threshold, making income up to ₹12.75 lakh tax-free under the new tax regime when combined with the revised tax slabs and the rebate for incomes up to ₹12 lakh.

The standard deduction is a fixed amount that salaried individuals and pensioners can deduct from their gross income, reducing their taxable income without needing to provide specific expense proofs. In the Union Budget 2025-26, the standard deduction has been increased from ₹50,000 to ₹75,000. This means if your total income is, say, ₹13 lakh, you can subtract ₹75,000 from it, making your taxable income ₹12.25 lakh. This helps lower your overall tax liability, especially under the new tax regime.

By Abhinandan, ago

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