Money & Banking

Cochin Chamber of Commerce and Industry seeks review of RBI circular on current accounts

Our Bureau Kochi | Updated on August 05, 2021

The body also requests that a detailed dialogue be entered into with the chambers/trade associations

The Cochin Chamber of Commerce and Industry has requested the Reserve Bank of India (RBI) for a review of its circular of August 2020 restricting the use of current accounts with banks other than those with whom loan facilities are granted.

As per the RBI’s directive, no bank can open or allow operation of current accounts for customers who have availed credit facilities in the form of cash credit/ overdrafts in any other bank.

K. Harikumar, the Chamber President said that the accounts have been closed by the banks unilaterally even in the case of borrowers who maintained current account with different branches of the same bank from where the cash credit/ overdraft facility was availed.

Also read: RBI gives banks 3 more months to comply with new rules on opening current accounts

It explained that the loan facility may be granted from a bigger branch while the companies operated current accounts with the same bank nearer to the factories, which could be in different locations.

These current accounts were used for disbursements to local purchases, wages, salary etc. to prevent the risk of carrying cash. These current accounts which are maintained in the same bank could be monitored and ensured that no diversion of funds takes place. The closure of these current accounts has put the companies in a very tight situation.

Similarly, small traders whose collections from sales are mostly in cash remit the proceeds in current accounts with smaller banks and later transfer the same to the bank where the overdraft facilities are availed.

They are forced to resort to maintaining current accounts since new generation banks and big public sector banks either refuse to accept cash or charge hefty fee as cash counting charges. These traders are also totally at a loss.

The chamber has requested the RBI to permit the usage of current accounts and also requests that a detailed dialogue be entered into with the chambers/ trade associations and ensure that genuine business is not put to difficulty on account of this circular.

Published on August 05, 2021

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