The Reserve Bank of India (RBI) has tweaked its circular on “Opening of Current Accounts by Banks - Need for Discipline”, allowing borrowers, where exposure of the banking system is ₹5 crore or more, to maintain current accounts with any one of the banks with which they have Cash Credit (CC)/Overdraft (OD) facility.

However, this is subject to the condition that the bank has at least 10 per cent of the exposure of the banking system to them.

The central bank has also permitted banks to open/maintain the following accounts, without any restrictions in the case of inter-bank accounts, acounts of All India Financial Institutions, accounts opened under specific instructions of Central Government and State Governments, etc.

The latest circular, which banks have to implement within one month, does away with the separate norms for borrowers where exposure of the banking system is ₹5 crore or more but less than ₹50 crore and where exposure of the banking system is ₹50 crore or more for opening current accounts prescribed in the August 6, 2020 cricular.

The earlier circular resulted in blocking of borrowers’ (with exposure of ₹5 crore or more but less than ₹50 crore to the banking system) current accounts by banks as norms allowed maintenance of only collection accounts with non-lending banks.

Further, borrowers’ with exposure of ₹50 crore and above to the banking system could not open any current account with non-lending banks.

The central bank has now tweaked its circular taking into account feedback received from the Indian Banks’ Association (IBA) and other stakeholders.

As per the latest circular, in respect of borrowers where exposure of the banking system is ₹5 crore or more, 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 bank maintaining current accounts for the borrower.

Borrowers with less than ₹5 crore exposure

For borrowers, where the exposure of the banking system is less than ₹5 crore, there is no restriction on opening of current accounts or on provision of CC/OD facility by banks.

This is 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 ₹5 crore or more.

RBI asked banks 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, to ensure compliance with its instructions.

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