The comparator matters as much as the percentage
Under the RBI (Commercial Banks – Know Your Customer) Directions, 2025, updated 1 October 2026, a company’s beneficial-owner ownership test is more than 10% of shares, capital or profits; a partnership’s is more than 10% of capital or profits. For an unincorporated association or body of individuals it is more than 15% of property, capital or profits. Trust beneficiary identification uses 10% or more. Exactly ten is therefore different from more than ten. Ownership tests do not remove the separate need to identify persons controlling the customer through other means.
This article concerns account-opening and ownership evidence for commercial banks under those Directions, checked on 23 October 2026. It is a Business Compliance guide, not an interpretation of FEMA investment eligibility, tax-treaty beneficial ownership or Companies Act BEN filings. Those regimes have distinct purposes and definitions. Start with the bank’s actual customer and applicable RBI direction rather than applying one universal “UBO percentage” to every form.
Trace natural persons, then examine control
Paragraph 5(1)(iv) covers persons acting alone, together or through juridical persons. For companies, control includes the right to appoint a majority of directors or control management or policy decisions through shareholding, management rights, shareholder agreements or voting agreements. For partnerships, management or policy control is separately relevant. A small economic interest does not rule out a controlling person.
Prepare an ownership chart linking each intermediate entity to natural persons. A multiplication of economic interests can be a useful starting calculation for an uncomplicated chain, but it is not an exhaustive legal control test. Aggregate a person’s relevant paths and direct entitlement; inspect nominee arrangements, voting pacts, profit entitlements and arrangements to act together. Do not conclude that no beneficial owner exists merely because each immediate corporate shareholder is below a screening percentage.
| Customer / route | Ownership comparator | Additional review |
|---|---|---|
| Company | More than 10% of shares, capital or profits | Other means of control, acting together and indirect interests. |
| Registered partnership | More than 10% of capital or profits | Management/policy control and the partnership deed. |
| Unincorporated association / body of individuals | More than 15% of property, capital or profits | Identify the correct legal form; societies fall within the stated explanation. |
| Trust beneficiaries | 10% or more interest | Also identify author, trustee and other natural persons exercising ultimate effective control. |
Trusts and fallback officials need a different working
The trust definition is not a percentage-only beneficiary list. Identify the author and trustee as well as qualifying beneficiaries and other ultimate controlling natural persons. Review the trust deed and arrangements through the chain. Do not mechanically omit the settlor or a trustee because no personal percentage is shown against their name.
Where no natural person is identified under the company, partnership or association limbs, the relevant natural person holding the senior managing official position is the fallback. Record the ownership and control enquiries supporting that conclusion. A widely dispersed register is not enough if a person actually controls policy through an agreement. Nor should the authorised signatory automatically be treated as the senior managing official without examining the role.
Pair the chart with entity and individual evidence
Paragraphs 33–37 prescribe entity-specific documents. A company file includes incorporation documents, memorandum and articles, PAN, authority documents, relevant individual records, senior-management names and business-address information. A partnership needs its registration certificate, deed, PAN, partner information and the applicable individual/authority records. Trust documentation includes the deed, registration and the specified persons and addresses. Paragraph 23 governs relevant individual CDD documents; paragraph 38 requires reasonable verification of beneficial-owner identity.
The documentation explanation in paragraph 36 includes unregistered trusts/partnerships under unincorporated association. Therefore, verify the legal status rather than extending this article’s registered-partnership examples automatically to an unregistered arrangement. Obtain the bank’s entity classification where the constitution is unusual.
Listed-entity relief is specific, not a blanket waiver
Paragraph 38(1) provides shareholder/beneficial-owner identification relief for the listed-entity circumstances it specifies, including an entity listed in India, a qualifying resident-and-listed entity in a notified foreign jurisdiction, or a subsidiary of such listed entities. “Listed somewhere abroad” is not the complete foreign test. This provision does not dispense with identifying the customer, verifying authority to operate the account or conducting required ongoing due diligence.
Update the file when ownership or control changes. A share transfer, altered profit share or new voting arrangement can change the answer without changing the bank mandate. Preserve the effective date of the change and reconcile the ownership chart with the bank submission. Never use a clean percentage table to conceal an unresolved nominee or control arrangement.
Worked illustrations
These illustrations use fictional facts and expressly stated assumptions. Amounts are Indian rupees unless a different currency or unit is specified. They are independent examples, not findings about any actual client.
Illustrative example 1: Company ownership at and just above ten per cent
An unlisted company has 1,00,000 identical shares and no special profit/capital rights. A owns 10,000: 10,000/1,00,000 × 100 = 10%. B owns 10,001: 10.001%. B crosses the more-than-10% ownership limb; A does not cross that limb merely by holding exactly 10%. Review other control and acting-together facts for both before finalising the complete beneficial-owner list.
Illustrative example 2: Aggregate a simple indirect chain and direct stake
P owns 80% of HoldCo, which owns 18% of the unlisted bank customer; P directly owns another 3%. On the assumed proportional economic rights, indirect interest = 80% × 18% = 14.4%; combined interest = 14.4% + 3% = 17.4%. This crosses the company ownership threshold. Also inspect actual voting and control rights; this multiplication alone is not the universal answer for every ownership chain.
Illustrative example 3: Partnership profit entitlement can trigger the test
In a registered partnership, R contributed ₹80,000 of total capital ₹10,00,000: 8%. The deed grants R 12% of profits. On annual profits of ₹25,00,000, R’s entitlement is ₹3,00,000. The more-than-10% profit limb is met even though the capital percentage is only 8%. Retain the deed rather than testing capital balances alone.
Illustrative example 4: Association threshold is more than fifteen per cent
Assume an unincorporated association with clearly documented proportional capital/profit rights and total capital of ₹20,00,000. M’s interest of ₹3,00,000 is 15%; N’s ₹3,02,000 is 15.1%. N crosses the stated ownership threshold; M does not solely on these facts. Review all interests, persons acting together and other applicable identification requirements before concluding the file.
Illustrative example 5: Trust beneficiary at exactly ten per cent
A trust deed grants X 10% and Y 9.9% of a defined ₹50,00,000 beneficial interest: ₹5,00,000 and ₹4,95,000 respectively. X meets the 10%-or-more beneficiary test. Y does not meet that numerical limb alone, but must still be considered if Y has another covered role or effective control. The author and trustee remain identification subjects independently of these percentages.
Illustrative example 6: A smaller shareholder can control the Board
K holds 8% of an unlisted company but has an enforceable right to appoint three of five directors. Three/five = 60%, a majority of the Board. The 8% holding does not cross the ownership limb; the appointment right nevertheless meets the described control route. Keep the actual agreement and assess its enforceability rather than screening K out by percentage.
Illustrative example 7: Dispersed ownership and the senior-official fallback
An unlisted company has twenty unrelated natural-person owners, each with 5% identical rights: 20 × 5% = 100%. Assume enquiry establishes no joint arrangements, nominee holdings or person controlling through other means. No individual crosses the ownership threshold on these facts. The relevant senior managing official is identified under the fallback; do not invent a 10% owner or substitute a junior signatory merely because the account form needs a name.
Ten-step verification table
| Step | Verification | Evidence to retain |
|---|---|---|
| 1 | Identify the customer’s legal form and applicable bank directions. | Constitution documents and bank classification. |
| 2 | Check any specifically applicable listed-entity relief. | Exchange listing, jurisdiction and subsidiary evidence. |
| 3 | Prepare an ownership chart to natural persons. | Registers, deeds and intermediate-entity records. |
| 4 | Map shares, capital, profits and other entitlements. | Rights analysis, not only share counts. |
| 5 | Apply the correct strict or inclusive comparator. | More-than-10%, more-than-15% or 10%-or-more working. |
| 6 | Aggregate relevant paths and investigate acting together. | Path calculations and arrangement confirmations. |
| 7 | Assess control independently of percentage ownership. | Appointment, management and voting agreements. |
| 8 | Identify all trust roles or justify the senior-official fallback. | Trust role map or documented enquiry conclusion. |
| 9 | Obtain and verify entity, authority and individual records. | Paragraphs 23 and 33–38 CDD file. |
| 10 | Record changes and reconcile the bank submission. | Effective-date log, submitted chart and supporting evidence. |
Sixteen practitioner FAQs
1. Does exactly 10% satisfy the company ownership test?
Not the more-than-10% limb by itself. Other control, indirect and acting-together facts can still matter.
2. Is the registered-partnership test confined to capital?
No. More than 10% of capital or profits can qualify, and management/policy control also matters.
3. Is the association threshold also 10%?
No. The stated ownership limb for an unincorporated association or body of individuals is more than 15%.
4. Does a trust beneficiary need to exceed 10%?
No. The trust wording uses 10% or more, so exactly 10% meets that beneficiary limb.
5. Can a corporate shareholder be the final natural-person answer?
The ordinary test traces through juridical persons to natural persons, subject to applicable specific relief.
6. Is multiplying ownership percentages sufficient in every case?
No. It is a useful arithmetic screen in a simple proportional chain, but control rights and arrangements require separate assessment.
7. Should direct and indirect paths be considered together?
Yes. Avoid understating the same person’s interest by looking at each path in isolation.
8. Can an 8% shareholder be a beneficial owner?
Yes, where qualifying control exists through another route, such as the right to appoint a majority of directors.
9. Are only percentage beneficiaries identified for a trust?
No. The author, trustee and other ultimate controlling natural persons are also covered.
10. Is the senior managing official always the first choice?
No. It is the stated fallback where no natural person is identified under the relevant ownership/control limbs after appropriate enquiry.
11. Is an authorised signatory necessarily the beneficial owner?
No. Authority to transact and beneficial ownership are different questions; the relevant individual records may be required for both roles.
12. Does a foreign stock-exchange listing automatically give relief?
No. Paragraph 38 contains jurisdiction and listing conditions. Verify those actual conditions.
13. Does listed-entity relief remove all bank KYC?
No. Customer identification, operating authority and other applicable CDD and ongoing obligations remain.
14. Does BEN-2 replace the bank’s beneficial-owner file?
No. Companies Act significant-beneficial-ownership reporting and commercial-bank KYC have separate definitions and compliance purposes.
15. Should these partnership examples be copied to an unregistered firm?
Not automatically. Paragraph 36’s documentation explanation addresses unregistered arrangements; establish the bank’s correct legal-form treatment.
16. What if ownership changes but bank signatories stay the same?
Review and update the beneficial-owner evidence. An unchanged mandate does not prove unchanged ownership or control.
Working-paper organisation
Keep the source documents, calculation and final conclusion together for the same entity and period. If using assurePractice or other assureOffice tools, use only confirmed available functions and retain this evidence with the output.
Conclusion
A defensible bank submission connects the correct comparator to a complete natural-person and control enquiry. Preserve rights documents, not just percentages, and keep the entity’s bank KYC conclusion separate from its tax, FEMA and BEN analyses.