The Hindu Business Line : NoC must for opening second current accounts

RESERVE Bank of India has once again instructed banks to scrupulously ensure that they do not open current accounts of entities which enjoy credit facilities (fund based or non-fund based) from the banking system without specifically obtaining a No-Objection Certificate from the lending banks.

Banks are also advised to note that non-adherence to the above discipline could be perceived to be abetting the siphoning of funds.

Such violations if reported to the RBI or noticed during the RBI's inspection would make the concerned banks liable for penalty under Banking Regulation Act, 1949, said a notification from the central bank.

Banks at the time of opening of current accounts should insist on a declaration from the account-holder to the effect that he is not enjoying any credit facility with any other bank or obtain a declaration giving particulars of credit facilities enjoyed by the intending customer with any other bank(s).

In the latter case, the concerned lending bank(s) are required to be duly informed so that suitable precautionary measures, where necessary could be taken by them, it added.

The above procedure which is considered essential in the interests of overall credit discipline is reportedly not being adopted by some banks and consequently facilitates diversion of funds by borrowers to the detriment of the banking system.

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