The Reserve Bank of India (RBI) has amended its circular on “Opening of Current Accounts by Banks – Need for Discipline”, allowing borrowers, where the exposure of the banking system is Rs 5 crore or more, to maintain checking accounts with any one of the banks having credit facilities Cash (CC) / Overdraft (OD).

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

The Central Bank has also allowed the banks to open/keep the following accounts, without any restrictions in the case of interbank accounts, accounts of all Indian financial institutions, accounts opened under specific instructions of central and state governments, etc.

The latest circular, which is to be implemented by the banks within one month, eliminates the separate criteria for borrowers where the exposure of the banking system is Rs 5 crore or more but less than Rs 50 crore and where the exposure of the banking system is Rs 50 crore. or more to open current accounts stipulated in the August 6, 2020 syllabus.

The previous circular led to the banning of accounts of borrowers (with Rs 5 crore or more but less than Rs 50 crore exposed to the banking system) of checking accounts by banks as the rules allowed maintenance of collection accounts only with non-lending banks.

Further, the borrowers who had exposures of Rs 50 crore and above to the banking system were not able to open any current account with the non-lending banks.

The central bank has now amended its circular taking into account the comments received from the Association of Indian Banks (IBA) and other stakeholders.

As per the latest circular, in respect of borrowers where the exposure of the banking system is Rs 5 crore or more, other lending banks may open collection accounts only provided that funds deposited in such collection accounts are transferred within two business days of receiving such funds, to the CC/OD account which holds The bank maintains current accounts for the borrower.

Borrowers who offered less than ₹5 crore

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

This is subject to obtaining an undertaking from such borrowers to inform the bank(s), when the credit facilities which they obtain from the banking system reach Rs 5 crore or more.

The Reserve Bank of India (RBI) has required banks to monitor all accounts regularly, at least on a semi-annual basis, specifically with respect to exposure of the borrower’s banking system, and the share of the bank in this exposure, to ensure compliance with its instructions.

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