RBI allows banks to open current account for customers availing credit from other banks

The October 29 guidelines come after Indian Banks’ Association (IBA) and other stakeholders gave their feedback on the matter.

In August 2020, RBI had brought in the guidelines to restrict the current accounts opened by banks in order to enforce credit discipline and check diversion of funds.

According to the guidelines, the banks were barred from opening current accounts for customers who had availed credit from other banks. The central bank also made it mandatory to route all transactions through the CC/OD account.

 Further, 10 percent of the borrower's exposure and debits to the CC/OD was to be for credit to the CC/OD account with a bank which has 10 percent or more exposure.

The step was taken to keep the transaction activity within the consortium banks.

RBI in its new guidelines issued said there is no restriction on opening of current accounts for borrowers with exposure of banking system less than Rs 5 crore, subject to an undertaking from the borrower.

Further, borrowers with exposure of over Rs 5 crore 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, RBI said.

RBI clarified borrowers not availing CC/OD facility from the banking system shall continue to maintain current accounts as per August 2020 circular.

Here, banks will have 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, RBI said.

RBI said bank may implement the necessary changes within one month and compliance position will be reviewed thereafter.