RBI eases current account opening rules for exposure below Rs 5 cr

The Reserve Bank (RBI) of India on Friday eased rules for opening certain current accounts, helping small firms in their daily business.

There will be no restriction on opening current accounts or cash credit (CC)over draft (OD) facility for borrowers whose exposure is less than Rs 5crore. The RBI asked banks to take undertaking from borrowers that they will inform lenders as and when the credit facilities availed from the banking system reaches Rs 5 crore or more.

The rules have been tweaked based on feedback received from Indian Banks’ Association (IBA) and other stakeholders, the RBI said in communication.

Borrowers whose banking system’s exposure in Rs 5 crore or more can maintain current accounts with any one of the banks with which it has CC/OD facility. Such bank must have at least 10 per cent of the exposure of the banking system to that borrower.

Further, other lending banks may open only collection accounts. This can be done on to the condition that funds deposited in collection accounts are remitted within two working days of receiving such funds to the CC/OD account maintained with bank maintaining current accounts for the borrower

A bank having the highest exposure may open current accounts when none of the lenders have at least 10 per cent exposure of the banking system to the borrower. Non-lending banks are not permitted to open current accounts.

Borrowers who are not availing CC/OD facility from the banking system will continue to maintain current accounts in line with present rules.

Further, banks will not face any curbs in opening maintaining the following accounts – interbank accounts, accounts opened under specific instructions of Central Government and State Governments. Banks have to ensure that these accounts are used for permitted/specified transactions only. Further, banks shall flag these accounts in the Core Banking System for easy monitoring.

Lenders to such borrowers may also enter into agreements/arrangements with the borrowers for monitoring of cash flows/periodic transfer of funds (if permissible) in these current accounts.

There will not be curbs on accounts attached by orders from Central or state governments, a regulatory body, courts and investigating agencies.

RBI said banks have to monitor all accounts regularly–at least on a half-yearly basis–specifically for the exposure of the banking system to the borrower.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor