The Securities and Exchange Board of India (SEBI) has overhauled its KYC framework for capital market intermediaries, introducing mandatory digital verification processes that fundamentally change how stock brokers onboard new clients. This guide breaks down every requirement and provides a clear roadmap to compliance.
Background: SEBI's Digital Push
India's capital markets have seen unprecedented retail participation since 2020, with demat account openings exceeding 15 crore. This growth has strained traditional in-person verification (IPV) processes and exposed their limitations -- inconsistent quality, geographic constraints, and vulnerability to impersonation. SEBI's new framework responds to these challenges by mandating video-based IPV as the primary verification method for all new demat account openings, while simultaneously tightening data verification requirements to combat identity fraud.
Key Requirements of the New Framework
1. Video-Based In-Person Verification (IPV)
SEBI now requires that all new demat account holders undergo video-based IPV conducted by an authorized official of the broker or depository participant. The video session must be a live, uninterrupted interaction (no pre-recorded videos). The official must visually verify the applicant's identity by comparing their live face against the photo on their PAN card and/or Aadhaar. The session must capture a clear, high-resolution live photograph of the applicant. The entire session must be recorded and stored with timestamps. The official conducting the IPV must be registered with the depository and their identity must be logged in the verification record.
2. Aadhaar-Based e-KYC Integration
Brokers must integrate with UIDAI's e-KYC infrastructure to perform Aadhaar authentication during the onboarding process. This can be done via OTP-based authentication (where the customer receives an OTP on their Aadhaar-linked mobile number) or biometric authentication (using registered biometric devices). The e-KYC response provides demographic and photograph data directly from UIDAI, which must be cross-referenced against the information provided by the applicant. Discrepancies must be flagged and resolved before the account can be activated.
3. Real-Time PAN Verification
PAN verification must happen in real-time during the onboarding session through the Income Tax Department's PAN verification API. The system must validate: PAN number authenticity, name match against the PAN database, PAN operational status (active/inactive/deactivated), and linkage status with Aadhaar. Applications with inactive or de-linked PAN must be rejected automatically. Name mismatches beyond an acceptable threshold must be escalated for manual review.
4. Document Capture Standards
SEBI has specified minimum quality standards for document images captured during the KYC process. Identity documents (PAN, Aadhaar) must be captured at a minimum resolution of 300 DPI or equivalent. The system must verify that documents are not cropped, blurred, or partially obscured. OCR must be used to extract text from document images for automated cross-verification. Original color images must be retained (no grayscale conversion). Watermarked or digitally-issued documents (like DigiLocker Aadhaar) must be accepted alongside physical documents.
Timeline for Compliance
April 2026 -- Phase 1
All new demat accounts must use video-based IPV. Paper-based IPV no longer accepted for new accounts.
July 2026 -- Phase 2
Real-time PAN verification and Aadhaar e-KYC integration mandatory. Document quality standards enforced.
December 2026 -- Phase 3
Full compliance audit by depositories. Non-compliant brokers face trading restrictions.
SEBI vs RBI KYC: Key Differences
While both SEBI and RBI mandate video-based customer verification, there are important differences brokers should understand. RBI's V-CIP framework is designed for banking relationships and includes provisions for ongoing transaction monitoring and periodic re-KYC. SEBI's framework is specifically designed for capital market access and focuses on IPV as a point-in-time identity confirmation. RBI requires multi-factor authentication within the video session itself, while SEBI's current framework accepts Aadhaar OTP as a standalone authentication factor. However, SEBI has stricter requirements around PAN verification and linkage checks, reflecting the tax reporting obligations in capital markets. Brokers who also hold NBFC licenses or banking partnerships need to implement both frameworks, which requires careful workflow design to avoid duplication while meeting both sets of requirements.
Compliance Checklist for Stock Brokers
- Deploy a video KYC platform with live recording and photograph capture capability
- Register all IPV-authorized officials with the depository
- Integrate UIDAI e-KYC APIs for Aadhaar authentication
- Integrate Income Tax PAN verification API for real-time validation
- Implement OCR-based document capture meeting 300 DPI minimum standards
- Build automated name-match and data cross-verification logic
- Set up secure storage for video recordings with depository-compliant retention
- Train authorized officials on the new video IPV process
- Accept DigiLocker-issued documents alongside physical document scans
How BASEKYC Supports SEBI Compliance
BASEKYC's platform is pre-configured for SEBI compliance out of the box. Our Stock Broker Verification workflow includes built-in video IPV with automated photograph capture, real-time PAN verification and Aadhaar e-KYC integration, OCR document processing that meets SEBI's quality standards, depository-compatible audit trail generation, and configurable maker-checker workflows for compliance teams. For brokers who also need RBI V-CIP compliance, our platform supports dual-regulation workflows that satisfy both frameworks in a single verification session.