RBI Eases Current Account Norms For Banks

The Reserve Bank of India on Friday eased parts of its current account guidelines first issued in August 2020 and extended the Oct. 31 deadline by a month to incorporate the changes.

Borrowers with less than Rs 5 crore worth of banking sector exposure can open current accounts, cash credit accounts and overdraft facilities without any restrictions, the RBI said in a circular. Opening such accounts is "subject to obtaining an undertaking from such borrowers that they shall inform the bank(s)" when they reach or go beyond that limit, it said.

For borrowers with a banking sector exposure of more than Rs 5 crore, the RBI requires that only one bank opens current accounts. This can be any bank of borrowers' choice where they already have cash credit and overdraft facilities. The lender opening the current account must also have at least 10% of the banking system's total exposure to a borrower.

The original guidelines had no distinction based on limits.

According to the latest circular, banks can also maintain the following accounts without any restrictions:

• Interbank accounts.

• Accounts for all-India financial Institutions.

• Accounts opened under the specific instructions of central or state governments.

• Accounts attached by the orders of central or state governments, regulatory bodies, courts, investigative agencies, etc. where a customer cannot make discretionary debits.

Banks maintaining collection accounts are permitted to debit fee or charges from such accounts before transferring the funds to the escrow, cash credit or overdraft account of the borrower.

Banks are also required to regularly monitor all accounts, at least on a half-yearly basis, for compliance with norms, especially on the banking sector's exposure to the borrower.

"If there is a change in exposure of banks or aggregate exposure of the banking system to the borrower which warrants implementation of new banking arrangements, such changes shall be implemented within a period of three months from the date of such monitoring," the RBI said.

The decision was taken on a review of the guidelines, in consultation with the Indian Banks' Association and other stakeholders, the RBI said.

In the original guidelines, the banking regulator had not made any distinctions on the size of the borrower. After prolonged delays in implementation, when banks did start following the norms earlier this year, it caused severe complications for thousands of account holders, who saw their balances being temporarily frozen for lack of regulatory compliance.

In August, the RBI extended the deadline for implementation to Oct. 31, considering the disruptions caused. The RBI had also asked banks to engage with their depositors and arrive at a mutually satisfactory resolution within the ambit of the guidelines.