Executive Summary:
This circular from the Reserve Bank of India provides guidelines for the implementation of previously issued instructions regarding the opening of current accounts by banks, with the aim of enforcing credit discipline. It reiterates existing instructions and extends the timeline for implementation to October 31, 2021. The circular also provides exemptions for specific entities and mandates banks to establish monitoring mechanisms.
Key Points / Main Content:
* **Existing Instructions Reiterated:**
* No restriction on opening current accounts if borrowers haven't availed CCOD facility and banking system exposure is less than ₹5 crore.
* For borrowers without CCOD facility, where exposure is ₹5 crore or more but less than ₹50 crore, lending banks can open current accounts. Non-lending banks can open current accounts for collection purposes only.
* Restrictions apply to borrowers who avail CCOD facilities.
* **Implementation Timeline Extension:**
* Banks have until October 31, 2021, to implement the provisions of the circular.
* Banks should engage with borrowers to resolve issues.
* Unresolved issues should be escalated to the Indian Banks Association (IBA).
* IBA to flag residual issues requiring regulatory consideration to the Reserve Bank by September 30, 2021.
* **Exemptions:**
* White Label ATM operators, their agents, Cash-in-Transit (CIT) companies, and Cash Replenishment Agencies (CRAs) are exempt from the current account circular dated August 6, 2020.
* **Monitoring Mechanism:**
* Banks must establish a monitoring mechanism at head office and regional/zonal office levels.
* The aim is to monitor non-disruptive implementation and prevent customer inconvenience.
* **Prohibitions:**
* Banks are not permitted to open current accounts for borrowers who have availed agricultural, personal Overdraft (OD), or OD against deposits.
Impact Analysis:
Scheduled Commercial Banks and Payments Banks:
* Impact: Banks are required to adhere to the guidelines on opening and operating current accounts, implement monitoring mechanisms, engage with borrowers to resolve issues, and meet the extended deadline for implementation.
* Action Required: Implement the provisions of the circular by October 31, 2021, establish monitoring mechanisms, resolve issues with borrowers, and escalate unresolved issues to the IBA.
Borrowers:
* Impact: Borrowers are subject to the restrictions on opening current accounts based on their credit exposure and CCOD facility availment.
* Action Required: Engage with banks to address any operational issues related to current accounts and CCOD facilities.
White Label ATM Operators, Agents, CIT Companies, and CRAs:
* Impact: Exempt from the provisions of the Current Account circular dated August 6, 2020.
* Action Required: No specific action required; exemption automatically applies.
Indian Banks Association (IBA):
* Impact: Responsible for providing guidance to banks on unresolved issues.
* Action Required: Provide guidance to banks and flag residual issues requiring regulatory consideration to the Reserve Bank by September 30, 2021.
Key Entities Referenced
Reserve Bank of India: The central bank of India, which issued the circular.
Scheduled Commercial Banks: The entities to whom the circular is addressed.
Payments Banks: The entities to whom the circular is addressed.
Opening of Current Accounts by Banks: The subject matter of the circular.
Indian Banks Association: An association to which banks can escalate issues for guidance.
White Label ATM operators: Entities whose accounts are exempt from certain provisions of the circular.
Cash-in-Transit CIT Companies: Entities whose accounts are exempt from certain provisions of the circular.
Manoranjan Mishra: Chief General Manager at Reserve Bank of India
भारतीय �रज़व र् ब�क
________________________RESERVE BANK OF INDIA________________________
www.rbi.org.in
RBI/2021-22/77
DOR.CRE.REC.35/21.04.048/2021-22 August 04, 2021
To,
All Scheduled Commercial Banks
All Payments Banks
Madam / Dear Sir,
Guidelines for Implementation of the circular on
Opening of Current Accounts by Banks
Please refer to circulars DOR.No.BP.BC/7/21.04.048/2020-21 dated August 6, 2020,
DOR.No.BP.BC.27/21.04.048/2020-21 dated November 2, 2020 and
DOR.No.BP.BC.30/21.04.048/2020-21 dated December 14, 2020 on Opening of
Current Accounts by Banks - Need for Discipline.
2. The instructions were issued vide the above circulars in order to enforce credit
discipline amongst the borrowers as well as to facilitate better monitoring by the
lenders; and for this purpose, a graded approach had been prescribed on opening and
operating of current accounts and CC/OD facilities. Banks were required to implement
these instructions in a non-disruptive manner while keeping the bonafide business
requirements of the borrowers in mind.
3. It is reiterated that:
a. In case of borrowers who have not availed of CC/OD facility from any bank,
there is no restriction on opening of current accounts by any bank if exposure of
the banking system to such borrowers is less than ₹5 crore.
b. In case of borrowers who have not availed of CC/OD facility from any bank
and the exposure of the banking system is ₹5 crore or more but less than ₹50
crore, there is no restriction on lending banks to such borrowers from opening acurrent account. Even non-lending banks can open current accounts for such
borrowers though only for collection purposes.
c. The restriction applies to borrowers in case they avail of CC/OD facility since
all operations that can be carried out from a current account can also be carried
out from a CC/OD account as banks in a CBS environment follow a one-bank-one-
customer model as against a one-branch-one-customer model.
4. We have in the meantime received requests from the banks for some more time
to resolve the operational issues while implementing the circular in letter and spirit.
Therefore, in order to ensure that the instructions are implemented in a non-disruptive
manner, it has been decided that:
a. Banks will be permitted time till October 31, 2021 to implement the provisions
of the circular. This extended time line shall be utilised by banks to engage with
their borrowers to arrive at mutually satisfactory resolutions within the ambit of the
circular. Such issues which banks are unable to resolve themselves shall be
escalated to Indian Banks’ Association (IBA) for appropriate guidance. Residual
issues, if any, requiring regulatory consideration shall be flagged by IBA to the
Reserve Bank for examination by September 30, 2021.
b. In terms of para 1(vii) of circular DOR.No.BP.BC.30/21.04.048/2020-21 dated
December 14, 2020, accounts of White Label ATM operators and their agents are
exempt from the provisions of the Current Account circular dated August 6, 2020.
Since Cash-in-Transit (CIT) Companies/ Cash Replenishment Agencies (CRAs)
essentially carry out a similar activity, the exemption would be applicable to these
entities as well.
c. Banks shall put in place a monitoring mechanism, both at head office and
regional/zonal office levels to monitor non-disruptive implementation of the circular
and to ensure that customers are not put to undue inconvenience during the
implementation process.
d. As has already been indicated in FAQ no 6 of circular
DOR.No.BP.BC.30/21.04.048/2020-21 dated December 14, 2020, banks are not
permitted to open current accounts for borrowers who have availed agricultural/
personal Overdraft (OD) or OD against deposits.5. Banks shall ensure that the contents of the circular are implemented in letter and
spirit without causing undue inconvenience to their borrowers. All other instructions
contained in the circulars ibid remain unchanged.
Yours faithfully,
(Manoranjan Mishra)
Chief General Manager