RBI releases guidelines for banks to open current accounts facility for borrowers

The Reserve Bank of India on Friday has come out with guidelines wherein banks may be allowed to open current accounts for borrowers, who have availed credit facilities in the form of cash credit (CC) and overdraft (OD) from the banking system.

The RBI pointed out that borrowers, whose exposure to the banking system is less than Rs 5 crore, won’t be any restriction on the opening of current accounts, subject to obtaining an undertaking from such borrowers that they shall inform the banks.

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Further, “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,” the central bank said in a release.

Similarly, 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 RBI noted.

However, 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, the central bank said adding further that non-lending banks are not permitted to open current accounts.

The RBI also clarifies that that borrower not availing CC/OD facility from the banking system shall continue to maintain current accounts.

The central bank further stated that banks shall 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 these instructions.

“Banks may implement the necessary changes within one month from the date of this circular. The compliance position thereon will be reviewed thereafter,” the bank concluded.