In 2002, the Reserve Bank of India (RBI) enacted KYC regulations. Money laundering, fraud, and terrorist financing are all examples of unethical actions that have led to the creation of such rules. Banks and other financial institutions are frequently used to carry out such actions.

Banks and other financial organisations can better track their customers and transaction trails now that KYC regulations are in place. The insurance and commodity trading industries have also implemented the KYC regulations. For mutual fund and broking accounts, the Securities and Exchange Board of India (SEBI) has made KYC compliance essential.