CKYC now mandates OTP for KYC download, ensuring customer consent and impacting KYC flows across banks, NBFCs, and fintechs.

CKYC Introduces OTP-Based KYC Download: Impact on KYC Processes, VKYC, and Fintech

Introduction

In April 2025, the Central KYC Records Registry (CKYCRR) rolled out a significant update to the Central KYC (CKYC) system: an OTP-based consent step for downloading individual KYC records (link). Under this new mechanism, whenever a financial institution (a Reporting Entity, or RE) attempts to retrieve a customer's KYC information from the central registry, an OTP (one-time password) will be sent to the customer’s registered mobile number, and the data will be released only after the OTP is verified. This change – formalized via Circular No. CKYC/2025/02 dated April 04, 2025 (link) – is poised to impact how banks, NBFCs, fintechs, and other players handle customer onboarding and KYC compliance.

*(Authored by the KwiKID Team, Think360.ai – a CAMS company, India.)

What is CKYC and Why This Update Matters

The Central KYC (CKYC) initiative is India’s unified, centralized repository of KYC records for customers across the financial sector. Established by the Government of India to streamline KYC processes, CKYC is managed by the Central Registry of Securitization Asset Reconstruction and Security Interest of India (CERSAI) (CKYC Archives - TrackWizz). It assigns each customer a unique KYC Identifier (CKYCR ID) and stores their verified identity documents, address, and other KYC details. This allows regulated institutions – banks, NBFCs, insurers, securities firms, etc. – to reuse a customer’s KYC information from the central registry instead of repeating KYC from scratch for every new relationship. The goal is a smoother onboarding experience and reduced duplication of effort, while maintaining compliance with KYC norms.

Why the OTP-based download update? In a word: consent. Prior to this change, an RE (say a bank) could fetch a customer’s KYC record from CKYC if it had the required identifiers (like PAN, etc.), often without the customer’s immediate knowledge. The new OTP-based consent mechanism ensures that the customer explicitly authorizes each retrieval of their KYC record. This aligns CKYC with emerging data privacy norms – for instance, India’s new data protection law emphasizes explicit user consent for sharing personal data. By adding an OTP verification, CKYCRR is enhancing privacy and security: no KYC data will be released from the central registry unless the customer themselves confirms the request via OTP. For institutions, this means a small tweak to processes, but a big step toward transparent and customer-friendly KYC practices.

Overview of the OTP-Based Download Mechanism

What exactly has changed? Going forward, whenever an RE initiates a CKYC record download (either through the CKYC web portal or via API integration), the following will occur:

• OTP Trigger: CKYCRR will automatically send a one-time password to the mobile number on record for that customer’s KYC ID. (This is the mobile number the customer provided during their original KYC – kept in the central record.)
• OTP Validation: The RE must input this OTP (received by the customer) back into the system (or via an API call) to validate the request. Only upon successful OTP verification will the CKYC system release the customer’s KYC details back to the requesting institution.
• If OTP Fails: If the OTP is not entered correctly or expires, the download request fails and no data is shared. The institution may re-initiate the process or fall back to doing a fresh KYC collection from the customer in such cases.

This is a departure from the earlier flow. Previously, once an institution found a customer’s CKYC record (by searching with identifying details), it could directly download the KYC information (demographic details, ID document scans, etc.) without further customer interaction. Now, the customer’s real-time participation (via OTP) is mandatory to complete that download. Essentially, CKYC data retrieval moves from a single-step pull to a two-factor authorized pull, adding a layer of security.

To illustrate the difference, here’s a simplified comparison of the old vs new CKYC individual download process:

As shown above, the key addition is the OTP authorization step before data release. Importantly, this OTP-based consent applies to individual customer KYC records. (Non-individual entities have separate KYC processes which may not involve OTP, but those remain unchanged in this update.)

Changes in CKYC Search & Download Processes

The introduction of OTP affects the “search and download” workflow for individual KYC records on both the CKYC web portal and the API interface. Here’s how these processes are impacted in practical terms:

• Search Process: Financial institutions will continue to perform a CKYC search as a first step to determine if a customer already has a CKYC record. This could be done by entering the customer’s ID number (PAN, Aadhaar, etc.) or other details on the CKYC portal or via the Search API. The search functionality itself remains the same – the system will inform the RE whether a matching KYC record exists and provide the CKYC Identifier (a 14-digit number) if found. The new wrinkle is what happens next: finding a record now leads into the OTP-gated download process. On the CKYC portal’s search results screen (for individual customers), users will see a prompt or button to “Send OTP & Download” instead of directly “Download”. In other words, search still finds the record, but you cannot view the KYC details until you go through OTP validation.
• Download Process: This is where the major change lies. After a successful search, to retrieve the KYC details, an authorized user (say, a bank’s KYC officer or the onboarding application) triggers the download. Immediately, CKYCRR sends an SMS with an OTP to the customer’s phone number on file. The officer or application then must enter the received OTP to proceed. On the web portal, a pop-up or field will likely appear to input the OTP. In an API scenario, the institution’s software must now call a new OTP submission endpoint as part of the download flow. Only after CKYCRR validates the OTP will the full KYC record be returned to the requesting entity. This effectively means customer consent is obtained in real-time for KYC reuse. From an operations perspective, REs needs to incorporate an extra step: contacting the customer for the OTP (if the process is not customer-facing) or guiding them to input the OTP in the digital journey.
• System Updates (API v1.3): Alongside the functional change, CKYCRR has also upgraded the technical interface. Both the Search API and Download API have been bumped to version 1.3. The Search API v1.3 now requires using the SHA-256 hashing algorithm (up from SHA-1) for enhanced security in request signatures. The Download API v1.3 introduces a two-step call: one call to initiate download (which triggers the OTP), and a second call to submit/verify the OTP, after which the KYC data is returned. (Details of these calls are provided in the CKYCRR API documentation for v1.3.) All institutions that have integrated CKYC into their systems must adapt to these changes. The older API versions (v1.2) will remain functional only until the cut-off date – CKYCRR has announced that v1.2 Search/Download APIs will be disabled from May 31, 2025 (8 PM onwards) (CKYCRR issued a circular regarding the ), after which only the new OTP-enabled APIs will work. The go-live for the new mechanism in production is May 09, 2025 (CKYCRR issued a circular regarding the ), giving institutions just a few weeks to test and transition. (Notably, CKYCRR has made the updated APIs available in a test environment immediately for integration testing (Circular-04.04.2025 | CS Rashmika Singh).)

In summary, banks and other REs need to update their CKYC processes and software: user interfaces must accommodate OTP input, and back-end systems must handle the new API workflow and hashing standards. This ensures that when the deadline passes, KYC data can continue to flow – now in a more secure, consented manner.

Impact on KYC Record Upload (New/Updates)

What about the upload side of CKYC? Uploading a KYC record to CKYC is the process of adding a new customer’s KYC information to the central registry (or updating an existing record with new information). The recent OTP-based download update does not directly alter the upload procedure – institutions will continue to collect the customer’s KYC documents and details (through physical forms, Video KYC, digital KYC, etc.) and then upload the data file to CKYCRR via the Upload API or portal. Once uploaded, the customer gets assigned a CKYC ID if new, or the existing record is refreshed. No OTP is required for the upload operation itself, since it is an RE pushing data to the repository (with the customer already involved in that KYC collection process).

However, there are indirect implications for the upload workflow in certain scenarios:

• Avoiding Duplicate KYCs: One of the benefits of CKYC is to avoid duplicate KYC records for the same customer. REs is expected to search the CKYC registry first, and if a record exists, use that instead of creating a new one (unless information needs update). With the OTP gate, if a customer’s record is found but the OTP verification cannot be completed (for instance, the phone number on record is outdated or the customer doesn’t have access to that phone), the institution might be unable to retrieve the existing KYC info. In such cases, the RE has little choice but to treat the customer as new – i.e. perform a full KYC collection and then upload a fresh KYC record. This could lead to a duplicate entry in CKYC (the old record remains, and a new one gets created) if not reconciled. It’s a new challenge: previously an institution might have pulled the old data despite the customer’s unreachable phone, but now they are encouraged (or forced) to update the central registry with current info by uploading a new record if the old one can’t be accessed. In the long run, this should improve data accuracy (the outdated record would eventually be superseded by the new one) , but in the short term it requires careful handling to avoid confusion.
• Streamlined Reuse when Possible: On the flip side, if the OTP verification is successful, the institution gains immediate access to a verified KYC record. They can then decide if any fresh documents or data are needed. Often, if the existing CKYC data is recent and satisfies all requirements (and perhaps the customer confirms nothing has changed), the institution may not need to collect documents again. In such scenarios, no new upload is necessary – the RE can simply rely on the existing CKYC record for compliance. This is a win-win: the customer isn’t asked to resubmit KYC documents, and the institution saves time. They would record the CKYC ID in their system as proof of KYC done. (If minor updates are needed, the RE can perform an update upload to modify the CKYC record – e.g. updating a new address or phone number. That process remains the same as before, just make sure to do a fresh search to get the CKYC ID and then submit the updated data file.)

In essence, the KYC upload process remains unchanged operationally, but its usage might shift: institutions will either skip unnecessary uploads thanks to consent-enabled reuse of existing records, or perform new uploads to update stale records when OTP-based retrieval fails. The net effect should be better quality KYC records in the central registry (because phone numbers/email will be kept current through this mechanism) and fewer redundant KYC duplications in the long run.

Industry Implications: Banking, NBFCs, Fintech, and More

The CKYC OTP-based download impacts all regulated entities that participate in CKYC – this span traditional banks, small finance banks, NBFCs (lenders, housing finance companies, etc.), fintech startups, payment institutions, insurance companies, mutual fund platforms, and securities brokers. Essentially, any organization that uses CKYC for customer KYC will need to adjust its processes. Below, we break down the implications for different players and use-cases:

• Banks & Financial Institutions: Banks have been among the primary users of CKYC. They typically integrate CKYC checks into their account opening or loan processing systems. For banks, this update means retraining staff and updating software in branch and back-office operations. For example, a bank’s branch officer performing account opening must now inform the customer that they will receive an OTP on their phone and assist in inputting it before the KYC data is fetched. This could slightly increase the time per onboarding at branches, but it greatly improves security. Many banks also offer digital account opening on mobile apps or online – those flows must be updated to handle the OTP seamlessly (e.g., triggering the OTP and providing a screen for the user to enter it). On the technical side, bank IT teams (or their software vendors) will need to upgrade to the CKYC API v1.3 and ensure the new SHA-256 signing is implemented. Banks operating at scale will appreciate the added assurance that any KYC data they pull is customer-approved at that moment, potentially reducing compliance risk. Also, since banks are subject to strict data privacy and AML regulations, this move helps them demonstrate stronger controls (auditors and regulators may see the OTP logs as proof of customer consent). A possible challenge for banks is handling cases where the phone number in CKYC is different from the customer’s current number – frontline staff will need clear protocols (e.g., “do full KYC and update CKYC if OTP fails”). Overall, banks will likely view this as a positive, compliance-friendly change, albeit one requiring swift operational adjustments.
• NBFCs (Non-Banking Financial Companies): NBFCs, including digital lenders and microfinance institutions, often leverage CKYC to speed up loan underwriting and onboarding. Many NBFCs have fully digital workflows or agent-assisted models. For them, the OTP-based retrieval will need to be embedded in their loan origination systems. If an NBFC uses a field agent with a mobile app to onboard customers, the app will now need to handle the OTP step (possibly the agent waits for the customer to receive and tell them the OTP). This adds a layer of identity confirmation – the agent can be more confident that the person’s phone is active and belongs to them, which is useful in remote onboarding. NBFCs will need to be mindful of any connectivity issues in rural areas (if OTP SMS are delayed, it could slow the process). But given NBFCs’ push towards digital verification (many already use Aadhaar-based eKYC or video KYC), integrating one more OTP step is not too burdensome. Compliance teams at NBFCs will welcome the audit trail of customer consent. Also, NBFCs often cater to repeat borrowers – with CKYC OTP in place, pulling up an existing customer’s KYC for a new loan will require a quick phone confirmation, ensuring the customer is indeed aware of the data reuse. From a timeline perspective, NBFCs must ensure their tech is updated by the May 2025 deadline, which might be a crunch if they rely on third-party software providers – many will be coordinating with vendors or with CKYC utility providers (like CAMS, NSDL, etc.) to get the new API in place.
• Fintechs and Digital-First Platforms: Fintech companies (payment apps, neo-banks, investment platforms, etc.) are typically very focused on smooth user experiences. Many fintechs have started using CKYC as part of their user onboarding to avoid asking for documents that a user has already provided elsewhere. For these players, the OTP requirement is a double-edged sword. On one hand, it introduces an extra step that could be seen as friction in the UX. On the other hand, it’s an opportunity to build trust by being transparent – fintech apps can present it as, “For your security, we are sending an OTP to your phone to fetch your KYC details from the central registry.” Users today are familiar with OTPs for verification, so they’ll likely understand it as a normal security step. Fintech developers will integrate this step such that the OTP entry is as convenient as possible (auto-reading the SMS OTP on mobile devices, for instance, to minimize user effort). One big advantage for fintechs is that CKYC retrieval with OTP can serve as an alternative to Aadhaar-based eKYC. Not all fintechs have access to online Aadhaar eKYC (which requires an license/connection to UIDAI). Instead, they were using offline Aadhaar XML or DigiLocker, or just collecting documents manually. Now, if a customer already has a CKYC record, a fintech can simply leverage that: the user just provides PAN or some detail, an OTP comes to their phone, and boom – the app can fetch their officially verified KYC info (name, DOB, address, ID docs). This can significantly streamline digital onboarding while staying compliant. The fintech will of course still have to upload KYC to CKYC after onboarding if any changes, but if nothing changed, they might skip having the user upload files. In terms of industry impact, expect fintechs to rapidly embrace this as it reduces drop-offs from document upload steps – as long as the CKYC data is available and up-to-date. One challenge they’ll monitor is OTP delivery success rates: any OTP failure could lead the user to abandon the signup. So fintechs might build a fallback: e.g., “Didn’t receive OTP or not on this number? Upload your documents instead.” In any case, fintech compliance officers will be happy that any data pulled is consented and logged, which simplifies explaining their processes to regulators and auditors.
• Insurance & Securities (Brokerages/Mutual Funds): Although not explicitly mentioned in the question, it’s worth noting that the CKYC is also leveraged in insurance policy issuance and by capital market entities. Insurers and brokers who use CKYC will face similar adjustments. Many of these players use CKYC via third-party KYC service providers. Those providers (which may include KRAs for mutual funds or agencies like CAMS, etc.) will incorporate the OTP flows into their platforms, and the insurance companies or brokerages will need to adapt accordingly. For instance, an investment app that pulls your CKYC to open a demat account will now pop up an OTP screen when fetching your details. The impact here is uniformly positive on compliance – it ensures investor consent for reusing KYC, which regulators like SEBI and IRDA are likely to appreciate.

In summary, across the BFSI spectrum, the OTP-based CKYC download mechanism brings a heightened focus on customer consent and data integrity. Different industry segments will integrate it in line with their customer interaction models (in-person vs digital). The immediate task is largely technical and procedural (update APIs, train staff, tweak user flows), but beyond that, it fundamentally raises the trust in the CKYC system. All participants can be more confident that a CKYC record pulled with OTP is not only accurate but also legitimately accessed.

Influence on Video KYC (VKYC) and Digital KYC processes

Ever since regulatory bodies (like RBI) permitted alternatives to in-person verification – such as Video KYC (VCIP – Video Customer Identification Process) and other Digital KYC methods – financial institutions have embraced these to onboard customers remotely. The CKYC OTP update dovetails with these digital KYC processes in important ways:

• Video KYC + CKYC OTP: In a Video KYC session, typically a bank officer verifies the customer’s identity over a video call, matches their face with ID documents, and captures data. If the customer already has a CKYC record, the officer can utilize that information to expedite the process. Now with OTP-based retrieval, the officer (or the system) can, during the video call, trigger an OTP to the customer’s phone and quickly pull the CKYC data. This can serve as a cross-check as well as auto-populate the information on the officer’s screen. For example, before the call, the bank might only have the customer’s name and phone; with CKYC OTP, by the time the video call starts, they could have the customer’s address and ID details pre-fetched (after the customer gave the OTP in a preliminary step). The officer can then simply confirm those details with the customer rather than typing everything manually. This shortens the call duration and ensures accuracy. It also confirms the phone number’s validity (since the OTP was received), which adds an extra layer of fraud prevention (impersonators would need the victim’s phone in hand, which is less likely). From a compliance standpoint, incorporating CKYC data into the video KYC review can help the institution ensure nothing is missed – e.g., if the CKYC record shows a different address than what the customer mentions on video, the officer can inquire about it, thus keeping KYC records consistent. The OTP step is not seen as onerous here; since the customer is already engaged in real time on the video call, reading out or entering an OTP is a natural extension of the process.
• Digital KYC (Online/App-based KYC): Digital KYC can refer to methods like scanning QR codes from Aadhaar, uploading document images through an app, or Aadhaar Offline e-KYC, etc. CKYC retrieval with OTP can become one of the digital KYC options. For instance, a fintech app might present a new user with choices: “Verify via Aadhaar”, “Verify via CKYC”, or “Manual upload”. If the user chooses CKYC, the app can ask for minimal details (like PAN and DOB) to search CKYC, then do the OTP step to fetch KYC. This is very user-friendly because it spares the user from taking photos of documents or downloading Aadhaar XMLs. It essentially leverages the KYC that the user might have done at their bank already. With OTP protecting the data, users can feel safe using this method. Digital KYC journeys will benefit from reduced friction whenever CKYC data is available. One thing to note: CKYC records might not have a photograph (they often do have a photo ID scan though). In purely digital onboarding, a live selfie or video is often taken for liveness check. So even if CKYC provides all textual data, a fintech might still capture a selfie for face match with the ID from CKYC. This complements the CKYC info to complete a robust digital KYC. Additionally, for partial KYC accounts (like wallets or small accounts that were opened with limited KYC), having the CKYC OTP mechanism encourages converting them to full KYC accounts by fetching the CKYC info once user consents.
• Consent and Audit Trail in e-KYC: Both VKYC and other digital KYC processes now commonly record the customer’s consent (for example, in video KYC the call itself is recorded including the customer agreeing to proceed). The CKYC OTP adds a digital proof of consent as well – the fact that the customer provided the OTP is logged by CKYCRR. This means, if ever there’s a dispute or audit, the institution can show that the customer approved the retrieval of data at that time. In an era of increasing privacy concerns, this is a valuable addition. It is similar to how Aadhaar e-KYC always required either biometric or OTP consent from the Aadhaar holder ([PDF] Aadhar Data Privacy Policy Of Department of Posts India).

Overall, the integration of CKYC OTP in VKYC and digital KYC flows will make remote onboarding even more robust. Customers get the convenience of not repeating KYC, institutions get the comfort of verified data plus consent. Some operational tweaking is needed (apps must handle an extra OTP; video officers must incorporate an OTP step in their scripts), but these are minor in the big picture. We expect to see many VKYC solutions and digital onboarding platforms update their software to intelligently leverage CKYC when available – essentially creating a hybrid KYC approach that maximizes reuse of existing verified data with real-time verification steps.

Operational and Compliance Benefits

The move to an OTP-based consent mechanism for CKYC downloads brings several clear benefits for operations and compliance:

• ✅ Customer Consent & Privacy: Perhaps the most significant benefit is the explicit customer consent now built into KYC sharing. Each time a KYC record is accessed, the customer is alerted via OTP and must approve. This gives customers more control and awareness regarding their personal data. From a privacy law compliance perspective, CKYCRR and REs can demonstrate that they are not sharing personal information behind the scenes without user permission. This is aligned with global best practices and data protection regulations which mandate informed consent for data processing. It also serves as a deterrent to any misuse of the CKYC system – an entity cannot fetch someone’s details without that person knowing (they would see an OTP message).
• ✅ Enhanced Security: The OTP acts as a second factor of authentication, ensuring that the person whose data is being fetched still has access to the registered phone number. This prevents unauthorized access. Even if, say, an employee at an institution tried to download a celebrity’s KYC details out of curiosity, they wouldn’t succeed unless that celebrity cooperated by giving the OTP. It also mitigates risks in case some institutions had weaker internal access controls – now CKYC itself enforces a security check for every retrieval. Additionally, the upgrade to SHA-256 for API calls tightens security for data in transit, reducing the chances of any request tampering.
• ✅ Data Accuracy & Freshness: Because the OTP is tied to the customer’s current mobile number, any outdated contact information in CKYC quickly becomes evident. Institutions will be motivated to update the CKYC record (via a fresh KYC upload) if the OTP repeatedly fails due to an old number. Over time this leads to cleaner data in the CKYC repository – active customers will have their phone (and possibly other details) kept up-to-date whenever they engage with a new financial service. Moreover, when a customer provides the OTP and sees their data auto-filled, they have an opportunity to spot and correct any inaccuracies in their KYC record (“Oh, my address was old in CKYC, let’s update that.”). In other words, the engagement of the customer in the process can indirectly drive more accurate KYC records across the system.
• ✅ Operational Streamlining: While OTP adds a step, it also opens possibilities to streamline overall onboarding. If a valid CKYC record is fetched with consent, institutions can skip collecting documents again, reducing the workload on operations teams who would otherwise verify those documents. This reuse of verified data cuts down duplication – one verified KYC can serve multiple accounts. That’s a core promise of CKYC, now reinforced with trust. Also, having a standard OTP flow across all REs means customers will become familiar with it – it could reduce confusion when dealing with multiple institutions. (Today a user might wonder why one bank fetched data silently vs another asked for documents; going forward, every bank will ask for OTP to fetch CKYC, creating a consistent experience.)
• ✅ Audit Trail & Compliance Reporting: Every OTP and its verification attempt is likely logged by CKYCRR. REs may also log these events. This creates a robust audit trail showing when and by whom a customer’s data was accessed, with the customer’s own authorization. For compliance officers and regulators, this is a boon – any investigation into data misuse or unauthorized account opening can refer to these logs. It strengthens the accountability on both the central registry and the institution’s side. Furthermore, having the unified process documented in the official circular means all institutions are on the same page regarding expectations, which improves overall compliance adherence in the industry.
• ✅ Alignment with Digital Infrastructure: India’s digital financial infrastructure (AADHAAR, DigiLocker, CKYC, etc.) is increasingly focusing on secure yet seamless data sharing (for example, the Account Aggregator framework for financial data sharing uses consent-based architecture). The CKYC OTP mechanism is another step towards a consent-based data sharing paradigm. It modernizes CKYC usage to be in line with other initiatives where user authorization is central (much like one consents via OTP to share Aadhaar details or to allow account aggregation). This alignment means CKYC can more easily integrate as a component in larger digital workflows without being the odd one out in terms of security.

In summary, although operational teams will need to adapt, the improvements in security, compliance, and potential efficiency gains make this a very positive development. It enhances trust in the CKYC system among consumers and regulators alike.

New Challenges and Considerations

No change is without its challenges. Financial institutions and fintechs will need to consider the following as they implement the OTP-based CKYC download:

• ⚠️ Integration Effort and Timeline: The most immediate challenge is the technical and logistical work to update systems by the deadline. With a go-live of May 9, 2025 and older APIs being deprecated by May 31, 2025 (CKYCRR issued a circular regarding the ), organizations have a short window to make necessary changes. This includes software development (to call the new API endpoints and handle OTP logic), testing in the CKYC sandbox, and deploying to production. Institutions that rely on third-party vendors or service bureaus for CKYC access will need to coordinate closely. Any delay could risk disruption in onboarding flows once the old API is turned off. For large banks, this might mean a crash program in April-May to push the changes across branches and channels. Smaller institutions may find the effort heavy if they lack in-house tech expertise. Basically, time is of the essence to implement this regulatory mandate.
• ⚠️ Customer Communication & UX: Introducing an OTP step means customers need to be guided on what’s happening. If not messaged properly, customers might get confused or suspicious – “I gave you my documents, why are you sending me an OTP for KYC again?”. It’s crucial for front-line staff and app interfaces to communicate the purpose of the OTP clearly: that it is for their security and required by the central KYC registry. There might be edge cases: e.g., if a customer’s phone is switched off or in an area with no signal, the onboarding will pause. Institutions should have scripts or on-screen guidance for such cases (“We will retry sending the OTP” or allow the process to resume once phone connectivity is back). Additionally, some customers (especially elderly or not tech-savvy) might struggle with reading an SMS OTP. Banks might need to provide assistance in branches. Fintech apps should account for OTP autofill to simplify it. Overall, user experience design needs a careful tweak to incorporate this step without frustrating users.
• ⚠️ OTP Delivery and Failure Rates: The system now hinges on OTP delivery via SMS (or potentially email, but the circular specifically mentions mobile number). SMS delivery in India is generally reliable, but not foolproof. Messages can be delayed or dropped due to network issues or DND settings (though OTPs are usually exempt from DND). If an OTP doesn’t arrive, the customer might get stuck. There should be an option to resend OTP and a clear timeout mechanism. Also, some users might have changed their phone number since the last KYC update – in such cases, they will never receive the OTP. This scenario needs handling: the institution might then perform a fresh KYC update. But they must explain to the customer why that’s needed (“It looks like your phone number in the central KYC system is outdated, so we’ll update your KYC now.”). A potential risk is duplicate KYC records if institutions just create a new record when OTP fails without attempting to unify with the old one – hopefully, they will try to merge or report the old ID during upload to update it. CKYCRR might also need to consider a process for customers who lose access to their registered mobile (perhaps allowing email OTP if email was on record, but that’s not mentioned in the circular).
• ⚠️ Operational Delays and Workload: While OTP retrieval is quick (usually within seconds), it introduces a dependency. In high-volume scenarios (say a mega-camp by a bank where thousands of accounts are opened in a day), the OTP step might become a slight bottleneck if not managed well. Imagine an assembly-line account opening at a corporate office – previously staff could rapidly fetch CKYC one after another; now they must wait for each customer to receive and tell them an OTP. This is a minor slow-down, but operations teams should be aware and plan for it. In branch environments, this might actually not cause much issue (as interacting with the customer for OTP is natural). In call-center based onboarding, it means the call may take a bit longer. Institutions might need to allocate a bit more time per KYC in their process flow or have more representatives if they want to maintain throughput. Training is also key: all relevant staff should be trained on the new procedure and troubleshooting steps (like what to do if OTP not received, etc.).
• ⚠️ System Changes and Bugs: Implementing new API versions and OTP flows could come with initial hiccups. There might be teething issues or bugs – for example, an API call signature failing due to new SHA2 requirements, or OTP validation errors if the sequence of calls isn’t handled exactly as per spec. Institutions should thoroughly test these in the provided test environment. Additionally, any user-interface not updated in time could lead to confusion (e.g., if a branch portal isn’t upgraded and the user tries to download, it will just fail since OTP is required but the old UI doesn’t handle it). So the cut-over must be synchronized. It’s a challenge for IT departments to ensure all touchpoints (branch software, RM tablets, mobile app, website, back-office tools) are in sync with the new process by the effective date.
• ⚠️ Dependency on Customer’s Phone: By making the customer’s phone availability a critical factor, the process inherits all the vagaries of telecom. If a customer is roaming internationally without their Indian SIM, or if the phone battery dies at that moment, the KYC retrieval cannot complete. This wasn’t a concern earlier. While these cases might be rare in initial onboarding (because usually the customer is actively engaged), they might pop up in scenarios like an institution re-KYCing dormant accounts via CKYC. It’s something to keep in mind – contingency procedures (like scheduling a later time for KYC when the customer is reachable). Similarly, for customers who have changed numbers without updating CKYC, there is an extra step now to get them to update it. Some may question why they need to do a fresh KYC just because of an outdated phone on file. Institutions will have to educate customers that CKYC is a central repository and it’s in their interest to keep it updated (perhaps highlighting benefits like easier onboarding elsewhere).
• ⚠️ Multi-Industry Coordination: Since CKYC spans banks, NBFCs, securities, etc., a customer might experience this OTP-based KYC fetch at various touchpoints. If any major sector participant lags behind (say some small banks not ready in time), there could be inconsistent experiences. However, given it’s a regulatory mandate, most will comply. Industry associations (like bank associations, NBFC associations) might need to share best practices for smooth rollout. Also, there may be support load on CKYCRR’s helpdesk (contact provided in the circular) when issues arise. REs should be prepared to collaborate with CKYCRR if any systematic issues with OTP service occur.

In essence, while the OTP-based download is a welcome change, financial institutions must navigate these challenges carefully to ensure a smooth transition. The good news is that these challenges are well understood (OTP-based verification is not new to the industry), and with proper planning, they can be mitigated. The end result should justify the effort: a more secure and user-consented KYC regime.

Conclusion

The introduction of OTP-based consent for CKYC record downloads marks a pivotal enhancement in India’s KYC infrastructure. It strengthens the balance between ease of doing business (through KYC data sharing) and customer data privacy (through explicit consent). For banks, NBFCs, fintechs, and other financial entities, this change brings about a new standard in KYC operations – one that requires quick adaptation in the short term, but promises long-term gains in trust, compliance, and efficiency.

From a big-picture viewpoint, CKYC’s evolution reflects the broader digital transformation of financial services in India. Just as Video KYC and Aadhaar eKYC revolutionized customer identification, this CKYC update ensures that a centralized KYC repository remains relevant and reliable in a more privacy-conscious era. Customers are likely to appreciate that any reuse of their KYC information now comes with their knowledge and approval. Institutions, on their part, will benefit from more robust KYC processes that can stand up to scrutiny and audits confidently.

At KwiKID (Think360.ai, a CAMS company), we are actively incorporating these changes into our KYC solutions. Our aim is to help clients navigate the update with minimal disruption – whether it’s updating API integrations to v1.3, redesigning user flows for OTP input, or ensuring back-end compliance by the deadline. We view the CKYC OTP mechanism as a positive step that complements our mission of frictionless yet compliant digital onboarding. By embracing such regulatory changes swiftly, the BFSI and fintech community can turn compliance into an advantage – using it to build greater customer trust and streamline inter-company KYC portability.

In conclusion, the CKYC OTP-based download is more than just a technical tweak; it’s a commitment to customer consent and data security woven into the very fabric of financial onboarding. As the May 2025 go-live approaches, all stakeholders are aligning to make this transition successful. Once in place, India’s centralized KYC system will be stronger, safer, and better equipped to support the next million (or hundred million) customer onboardings in the years to come.

Sources:

• Central KYC Records Registry, Circular No. CKYC/2025/02 (April 04, 2025) – Introduction of OTP-based consent mechanism for CKYC downloads.
• TeamLease RegTech update on CKYC OTP-based download and API upgrade (CKYCRR issued a circular regarding the ) (CKYCRR issued a circular regarding the ).
• TrackWizz Knowledge Hub – OTP-based consent mechanism in CKYC download (Apr 2025) (Link).
• Background on CKYC (Central KYC) and its management by CERSAI (CKYC Archives - TrackWizz).
• LinkedIn post by Compliance Professional summarizing CKYC OTP update (April 2025) (Circular-04.04.2025 | CS Rashmika Singh) (Circular-04.04.2025 | CS Rashmika Singh).
• RBI Master Direction on KYC (mention of Video KYC – VCIP) and industry articles on digital KYC (for contextual understanding).
• Digital Personal Data Protection Act, 2023 – emphasis on consent in data sharing ([PDF] Aadhar Data Privacy Policy Of Department of Posts India). (Related context)