When a bank asks a company, partnership firm or trust for its beneficial owners, it is looking beyond the name on the account. RBI's KYC framework requires regulated entities to identify the natural person or persons who ultimately own or control a legal-person customer. The test is important during account opening and can also matter when ownership or control changes later.
The current framework is contained in RBI's Master Direction - Know Your Customer (KYC) Direction, 2016, as amended from time to time. RBI's 2025 KYC Amendment Directions are also useful for confirming that the Master Direction remains an actively maintained compliance framework.
Beneficial owner is a natural-person test
For legal persons, the KYC exercise is designed to identify the natural person behind ownership or control. A corporate shareholder or another partnership in the ownership chain is therefore not necessarily the end of the analysis. The regulated entity must take reasonable steps to identify and verify the relevant natural person or persons under the applicable rule.
This is different from merely listing directors, partners or authorised signatories. A person can be authorised to operate the account without being a beneficial owner, while a beneficial owner may exercise ownership or control without being the day-to-day bank signatory.
Company: more than 10% ownership or control
For a company customer, RBI's KYC Master Direction defines the beneficial owner as the natural person who, acting alone, together, or through one or more juridical persons, has a controlling ownership interest or exercises control through other means. The current controlling-ownership threshold is ownership of or entitlement to more than 10% of the shares, capital or profits of the company.
Ownership percentage is not the only route. Control can also arise through rights to appoint a majority of directors or to control management or policy decisions, including through shareholding, management rights, shareholder agreements or voting agreements. A KYC review should therefore not stop simply because nobody crosses the numerical ownership threshold.
Partnership firm: more than 10% of capital or profits, or control
For a partnership firm, the beneficial owner is the natural person who has ownership of or entitlement to more than 10% of the capital or profits, whether acting alone, together or through one or more juridical persons, or who exercises control through other means. For this purpose, control includes the right to control management or policy decisions.
A practical review should examine the partnership deed, current profit-sharing ratio and any arrangement that gives a person effective management control. Looking only at the capital contribution can miss a person whose profit entitlement or control rights trigger the rule.
Unincorporated association or body of individuals: more than 15%
For an unincorporated association or body of individuals, including a society for this purpose, the ownership threshold is different. The beneficial owner is the natural person with ownership of or entitlement to more than 15% of the property, capital or profits, whether directly or through a chain.
This 15% threshold is an easy point to confuse with the 10% company and partnership tests. Compliance checklists should therefore identify the customer's legal form before applying a percentage.
Trusts: author, trustee, 10% beneficiaries and ultimate control
Trust KYC does not work as a simple shareholding test. The beneficial-owner identification includes the author of the trust, the trustee, beneficiaries with 10% or more interest in the trust, and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership.
Accordingly, a trust file may contain multiple categories of beneficial owners at the same time. The trust deed, amendments, trustee details, beneficiary interests and control arrangements should be reviewed together.
What if no natural person crosses the threshold?
For companies, partnerships and unincorporated associations or bodies of individuals, the RBI framework provides a fallback where no natural person is identified under the ownership or control tests: the beneficial owner is the relevant natural person holding the position of senior managing official. This prevents the KYC exercise from ending with 'no beneficial owner found' merely because ownership is widely dispersed.
Listed-company exception
RBI's KYC framework also provides an important exception. Where the customer or owner of the controlling interest is an entity listed on a stock exchange in India, an entity resident in a notified jurisdiction and listed on a stock exchange there, or a subsidiary of such listed entities, identification and verification of individual shareholders or beneficial owners of those entities is not required under this specific rule.
Practical beneficial-owner checklist
- Identify the legal form first: company, partnership, trust and unincorporated body use different tests.
- Draw the ownership chain: trace corporate or other juridical owners until the relevant natural persons are visible.
- Test the correct percentage: more than 10% for company ownership; more than 10% for partnership capital or profits; more than 15% for an unincorporated association or body of individuals; and 10% or more beneficiary interest for trusts.
- Test control separately: review voting, management, appointment and contractual rights instead of relying only on percentages.
- Apply the senior-managing-official fallback where required: do not conclude the file with no beneficial owner merely because nobody crosses the ownership threshold.
- Collect evidence: maintain current constitutional documents, ownership charts, declarations and identity evidence that support the conclusion.
- Revisit after changes: a transfer, admission or retirement of a partner, trust amendment or new control agreement can change the beneficial-owner result.
Worked example
Suppose an Indian private company is owned 88% by another private company and 12% directly by Individual A. Individual A already crosses the company test because 12% is more than 10%. The remaining 88% should not simply be recorded as 'Company B' and ignored; the ownership and control chain behind Company B must be analysed to identify any additional relevant natural person, unless an applicable listed-entity exception changes the exercise.
Now compare a society in which Individual A is entitled to 12% of the relevant property or profits. The company threshold should not be copied across mechanically: the unincorporated association or body-of-individuals test uses more than 15%, while control and the fallback rule must still be considered.
Practical takeaway
Beneficial-owner KYC is an entity-specific natural-person analysis, not a single universal percentage test. Start by identifying the customer's legal form, trace ownership through intermediate entities, test both ownership and control, and document why each person is or is not treated as a beneficial owner. The most common avoidable error is applying one threshold to every entity type.
