Description

Trading restrictions for clients with non-validated KYC from December 1-31, 2025, effective January 24, 2026. Clients with KYC on hold will not be permitted to trade or square off positions.

Summary

NSE has issued guidelines regarding KYC validation requirements following amendments to SEBI KYC Registration Agency (KRA) Regulations, 2011. Clients whose KYC records uploaded to KRAs between December 1-31, 2025 remain unvalidated (on hold status) will face trading restrictions from January 24, 2026. These clients will neither be permitted to trade nor square off existing open positions until they complete validation requirements. The circular also addresses the centralized mechanism for reporting investor demise through KRAs.

Key Points

  • Clients with KYC “On Hold” status (uploaded December 1-31, 2025) will be restricted from trading effective January 24, 2026
  • Restrictions apply to both Aadhaar-based and Non-Aadhaar based OVD (Officially Valid Documents)
  • Affected clients cannot square off open positions; positions will expire naturally on contract expiry dates
  • NSE will flag non-compliant PANs as “Not Permitted to Trade” from January 24, 2026
  • Clients who become KRA compliant will be permitted to trade on T+1 basis after compliance confirmation
  • Trading Members must block debit transactions and suspend trading accounts for deceased investors as reported by KRAs daily
  • Non-compliant client list available on member portal at ENIT > Log > Downloads

Regulatory Changes

This circular implements guidelines pursuant to:

  1. SEBI Circular SEBI/HO/MIRSD/FATF/P/CIR/2023/0144 dated August 11, 2023: Amendment to SEBI KYC Registration Agency Regulations, 2011

  2. SEBI Circular SEBI/HO/OIAE/OIAE_IAD-1/P/CIR/2023/0000000163 dated October 03, 2023: Centralized mechanism for reporting investor demise through KRAs

  3. NSE Circular NSE/ISC/71736 dated December 10, 2025: Simplification of KYC process and rationalisation of Risk Management Framework at KRAs

The amendments strengthen KYC validation processes and establish stricter enforcement mechanisms for non-compliance.

Compliance Requirements

For Trading Members:

  1. Identify clients with KYC records in “On Hold” status uploaded to KRAs between December 1-31, 2025
  2. Download non-compliant client list from member portal: https://enit.nseindia.com/MemberPortal/ (File Path: ENIT > Log > Downloads, File: _Non-Validated_Clients_by_KRA)
  3. Notify affected clients about trading restrictions and validation requirements
  4. Ensure clients complete KYC validation with KRAs before January 24, 2026
  5. Block debit transactions and suspend trading accounts for deceased investors as per daily KRA reports
  6. Inactivate/close UCC (Unique Client Code) in all stock exchanges for deceased investors
  7. Monitor daily updates from KRAs regarding client compliance status

For Clients:

  1. Complete KYC validation requirements with KRAs if their KYC is on hold
  2. Ensure all documentation and verification processes are completed before January 24, 2026
  3. Note that once compliant, trading will be permitted on T+1 basis

Important Dates

  • December 1-31, 2025: Period during which KYC records uploaded to KRAs are subject to this circular’s restrictions
  • January 12, 2026: Circular issue date (NSE/ISC/72265, Circular Ref. No: 03/2026)
  • January 24, 2026: Effective date for trading restrictions on non-validated clients
  • T+1 basis: Compliant PANs will be permitted to trade one day after compliance confirmation received from KRA

Impact Assessment

Operational Impact:

  • Trading Members must implement systems to identify and restrict non-compliant clients
  • Clients with unvalidated KYC face complete trading restrictions including inability to exit existing positions
  • Open positions for non-compliant clients will remain until natural contract expiry, potentially increasing risk exposure
  • Daily monitoring required for KRA compliance updates and deceased investor reports

Market Impact:

  • Medium to high impact on brokers with significant client bases having pending KYC validations
  • Potential liquidity impact if substantial number of clients are affected
  • May cause operational strain on KRAs as clients rush to complete validation before deadline

Risk Considerations:

  • Clients unable to square off positions face increased market risk until contract expiry
  • Brokers may face increased customer service inquiries and complaints
  • Enhanced focus on KYC compliance strengthens market integrity and investor protection

Contact Information:

For queries: uci@nse.co.in | Toll Free: 1800 266 0050 (option 5)

Impact Justification

High severity due to immediate trading restrictions affecting non-compliant clients from January 24, 2026. Clients cannot trade or square off positions until KYC validation is complete, potentially causing significant operational disruption for brokers and investors.