The Reserve Bank of India  eased current account rules for bank exposures less than Rs 5 crore. Now, banks may open current accounts for borrowers who have availed credit facilities in the form of cash credit (CC)/ overdraft (OD) from the banking system, said RBI in a release.

The development comes after the RBI reviewed and took into account the feedback received from Indian Banks’ Association (IBA) and other stakeholders, it said. The Central Bank in August 2020 had brought in the guidelines around restriction of current accounts opened by banks. These were to enforce credit discipline and check diversion of funds.

RBI barred banks from opening current accounts for customers who have availed credit from other banks and all transactions to be routed through the CC/OD account. Additionally, 10 per cent of the borrower’s exposure and debits to the CC/OD should only be for credit to the CC/OD account with a bank which has 10 per  cent or more exposure. This was done in order to check for diversion of funds and keeping the transaction activity within the consortium banks.

In its new guidelines issued on October 29, RBI said for borrowers with exposure of banking system less than Rs 5 crore there is no restriction on opening of current accounts, subject to an undertaking from the borrower

“For borrowers, where the exposure of the banking system is less than Rs 5 crore, there is no restriction on opening of current accounts or on provision of CC/OD facility by banks, subject to obtaining an undertaking from such borrowers that they shall inform the bank(s), as and when the credit facilities availed by them from the banking system reaches Rs 5 crore or more,” the banking regulator said in its guidelines.

In respect of borrowers where exposure of the banking system is Rs 5 crore or more, such borrower can maintain current accounts with any one of the banks with which it has CC/OD facility, provided that the bank has at least 10 per cent of the exposure of the banking system to that borrower, it added.

Further, other lending banks may open only collection accounts subject to the condition that funds deposited in such collection accounts will be remitted within two working days of receiving such funds, to the CC/OD account maintained with the above-mentioned bank maintaining current accounts for the borrower. 

The banking regulator also permitted banks to open and maintain inter-bank accounts, all accounts with institutions like EXIM Bank, NABARD, NHB, and SIDBI, accounts attached by orders of central or state government and investigative agencies without any restrictions.

In case none of the lenders has at least 10 per cent exposure of the banking system to the borrower, the bank having the highest exposure may open current accounts. Non-lending banks are not permitted to open current accounts, RBI said. It it further clarified that borrowers not availing CC/OD facility from the banking system shall continue to maintain current accounts as per the circular dated August 6, 2020.

Here, banks will have to monitor all accounts regularly, at least on a half-yearly basis, specifically with respect to the exposure of the banking system to the borrower, and the bank’s share in that exposure, RBI said. Banks may implement the necessary changes within one month and compliance position will be reviewed thereafter.