Question: Does regulator allow banks to ask irrelevant lifestyle questions during KYC for a low-risk customer?
Answer: No. RBI says the information sought should be relevant, risk-based, and not intrusive.

Supporting evidence:
title: rbi.org.in/Notification.aspx
quote: Banks should, therefore, ensure that information sought from the customer is relevant to the perceived risk, is not intrusive, and is in conformity with the guidelines issued in this regard It has come to the notice of Reserve Bank that banks are seeking personal information/details like number of dependents, the names of sons and daughters, lifestyle, number of foreign visits undertaken during the last three years, details of family members/relatives settled abroad, assets and liabilities, name and date of birth of spouse, wedding date, investments, etc,. from customers which are not mandatory and relevant to perceive risk of a prospective customer while complying with KYC/AML requirement
context: a financial transaction which can pose significant reputational or other risks to the bank, say, a wire transfer or issue of a high value demand draft as a single transaction.

4. Guidelines 2.1 General (i) (a) Banks should keep in mind that the information collected from the customer for the purpose of opening of an account is to be treated as confidential and details thereof are not to be divulged for cross selling or any other like purposes. Banks should, therefore, ensure that information sought from the customer is relevant to the perceived risk, is not intrusive, and is in conformity with the guidelines issued in this regard. (b) It has come to the notice of Reserve Bank that banks are seeking personal information/details like number of dependents, the names of sons and daughters, lifestyle, number of foreign visits undertaken during the last three years, details of family members/relatives settled abroad, assets and liabilities, name and date of birth of spouse, wedding date, investments, etc,. from customers which are not mandatory and relevant to perceive risk of a prospective customer while complying with KYC/AML requirement during the process of opening an account or during periodic updation. Banks should obtain only the ‘mandatory’ information required for KYC purpose at the time of opening the account/during periodic updation. Other ‘optional’ customer details/additional information, if required, may be obtained separately after the account is opened only with the explicit consent of the customer. The customer has a right to know what is the information required for KYC that she/he is obliged to give, and what is the additional information sought by the bank that is optional. Both the ‘mandatory’ and ‘optional’ information collected from the customer areto be treated as confidential. (ii) Banks should ensure that any remittance of funds by way of demand draft, mail/telegraphic transfer or any other mode and issue of travellers’ cheques for value of Rupees fifty thousand and above is effected by debit to the customer’s account or against cheques and not against cash payment. (iii) Banks should ensure that the provisions of Foreign Contribution (Regulation) Act, 1976 as amended from time to time, wherever applicable, are strictly adhered to. 2.2 KYC Policy Banks should frame their KYC policies incorporating

the following four key elements: (a) Customer Acceptance Policy; (b) Customer Identification Procedure; (c) Monitoring of Transactions; an