Description

NSE circular implementing trading restrictions for clients whose KYC validation is on hold, effective August 23, 2025.

Summary

NSE has issued guidelines following amendments to SEBI KYC Registration Agency (KRA) Regulations, 2011. Clients whose KYC validation is “On Hold” at KRAs for uploads between July 1-31, 2025, will be prohibited from trading and squaring up positions effective August 23, 2025, until compliance requirements are met.

Key Points

  • Clients with KYC “On Hold” status (both AADHAAR and Non-AADHAAR based) uploaded to KRA from July 1-31, 2025 will face trading restrictions
  • Trading prohibition and position square-up restrictions effective August 23, 2025
  • Open positions will naturally expire on contract expiry dates
  • KRA shares demise data daily for account blocking and trading suspension
  • Non-compliant PANs will be flagged as “Not Permitted to Trade”
  • Compliant clients will be permitted to trade on T+1 basis

Regulatory Changes

  • Implementation of centralized mechanism for reporting investor demise through KRAs
  • Enhanced KYC validation requirements with stricter enforcement
  • Daily sharing of demise data by KRAs for immediate account actions
  • Automatic flagging system for non-compliant PANs

Compliance Requirements

  • Trading members must ensure client KYC validation is completed through KRAs
  • Block debit transactions and suspend trading accounts for deceased investors
  • Inactivate/close UCC in all stock exchanges for non-compliant accounts
  • Monitor daily KRA compliance updates for client trading permissions
  • Access non-compliant client lists through member portal

Important Dates

  • July 1-31, 2025: KYC uploads subject to validation requirements
  • August 23, 2025: Trading restrictions effective date for non-validated clients
  • Daily: KRA shares demise data and compliance updates
  • T+1: Trading permission granted after KRA compliance achieved

Impact Assessment

High operational impact as clients with pending KYC validation will lose trading access and ability to manage existing positions. Trading members must proactively ensure client compliance to avoid service disruption. The measure strengthens market integrity through enhanced KYC verification but may temporarily affect trading volumes for non-compliant accounts.

Impact Justification

High impact as clients with non-validated KYC will be blocked from trading and unable to square up positions from August 23, 2025