Executive Summary:
This circular from the Reserve Bank of India addresses the opening of current accounts by banks, providing revised guidelines based on feedback from stakeholders. It details regulations for borrowers with Cash Credit/Overdraft (CC/OD) facilities, especially concerning exposure limits. Banks must implement necessary changes within one month of the circular date (October 29, 2021), and compliance will be reviewed thereafter.
Key Points / Main Content:
* **Borrowers with Exposure Less Than ₹5 Crore:**
* No restrictions on opening current accounts or providing CC/OD facilities.
* Borrowers must inform banks when their credit facilities reach ₹5 crore or more.
* **Borrowers with Exposure of ₹5 Crore or More:**
* Current accounts can be maintained with one bank having CC/OD facility and at least 10% of the banking system's exposure.
* Other lending banks can open collection accounts, with funds remitted to the primary CC/OD account within two working days.
* If no lender has at least 10% exposure, the bank with the highest exposure may open the current account.
* Non-lending banks cannot open current accounts.
* **Borrowers without CC/OD Facility:**
* Continue to maintain current accounts as per the circular dated August 6, 2020.
* **Permitted Accounts (No Restrictions):**
* Interbank accounts
* Accounts of All India Financial Institutions (AIFIs) like EXIM Bank, NABARD, NHB, and SIDBI.
* Accounts opened under specific instructions from Central and State Governments.
* Accounts attached by orders of governments/regulatory bodies/courts/investigating agencies, restricting discretionary debits.
* **Collection Account Operations:**
* Banks can debit fees/charges from collection accounts before transferring funds to the escrow/CC/OD account of the borrower.
* **Monitoring Requirements:**
* Banks must monitor accounts regularly (at least half-yearly) for compliance, considering exposure and share.
* Changes in banking arrangements due to exposure changes must be implemented within three months of monitoring.
* **Implementation and Review:**
* Banks must implement changes within one month of the circular date.
* Compliance will be reviewed thereafter.
Impact Analysis:
* **Scheduled Commercial Banks and Payments Banks:**
* *Impact:* Must adjust their procedures for opening and managing current accounts based on borrower exposure and lending arrangements.
* *Action Required:* Implement changes within one month and monitor accounts regularly to ensure compliance.
* **Borrowers with Credit Facilities:**
* *Impact:* May need to adjust banking relationships based on exposure levels and lender share.
* *Action Required:* Inform banks when credit facilities reach ₹5 crore or more, and comply with the revised account holding regulations.
* **Indian Banks Association (IBA):**
* *Impact:* The feedback provided by the IBA was considered in the revised guidelines.
* *Action Required:* Assist member banks in understanding and implementing the new guidelines.
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for regulating the banking system.
Scheduled Commercial Banks: All banks in India that are listed in the Second Schedule to the Reserve Bank of India Act, 1934.
Payments Banks: A type of bank in India that is allowed to accept deposits, offer remittance services, and provide other basic banking services, but cannot lend money.
Indian Banks Association: An association of banks and financial institutions in India.
Cash Credit (CC): A type of short-term loan facility offered by banks to businesses to meet their working capital requirements.
Overdraft (OD): A credit facility that allows a customer to withdraw money from a bank account even if the account balance is zero.
All India Financial Institutions: Financial institutions in India that have been established to provide financial assistance to specific sectors of the economy. Examples include EXIM Bank, NABARD, NHB, and SIDBI.
NABARD: National Bank for Agriculture and Rural Development, an apex development finance institution in India.
भारतीय �रज़व� ब�क
________________________RESERVE BANK OF INDIA________________________
www.rbi.org.in
RBI/2021-22/116
DOR.CRE.REC.63/21.04.048/2021-22 October 29, 2021
All Scheduled Commercial Banks
All Payments Banks
Madam/Sir,
Opening of Current Accounts by Banks - Need for Discipline
Please refer to our circular DOR.No.BP.BC/7/21.04.048/2020-21 dated August 6,
2020 on the captioned subject and associated circulars thereon1.
2. On a review and taking into account feedback received from Indian Banks’
Association (IBA) and other stakeholders, it has been decided that banks may open
current accounts for borrowers who have availed credit facilities in the form of cash
credit (CC)/ overdraft (OD) from the banking system as per the provisions below:
(i) For borrowers, where the exposure of the banking system is less than ₹5
crore, there is no restriction on opening of current accounts or on provision of
CC/OD facility by banks, subject to obtaining an undertaking from such
borrowers that they shall inform the bank(s), as and when the credit facilities
availed by them from the banking system reaches ₹5 crore or more.
(ii) In respect of borrowers where exposure of the banking system is ₹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.
Further, 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. In
case none of the lenders has at least 10% exposure of the banking system to the
borrower, the bank having the highest exposure may open current accounts.
Non-lending banks are not permitted to open current accounts.
1 DOR.No.BP.BC.27/21.04.048/2020-21 dated November 2, 2020, DOR.No.BP.BC.30/21.04.048/2020-21 dated
December 14, 2020 and DOR.CRE.REC.35/21.04.048/2021-22 dated August 04, 20213. It is clarified that borrowers not availing CC/OD facility from the banking system
shall continue to maintain current accounts as per para 1(v) of the above mentioned
circular dated August 6, 2020, as hitherto.
4. Further, banks are permitted to open/ maintain the following accounts, without any
restrictions placed in terms of the above-mentioned circular dated August 6, 2020,
subject to meeting the conditions specified as at para 2 of
DOR.No.BP.BC.30/21.04.048/2020-21 dated December 14, 2020:
(i) Inter-bank accounts
(ii) Accounts of All India Financial Institutions (AIFIs), viz., EXIM Bank,
NABARD, NHB, and SIDBI
(iii) Accounts opened under specific instructions of Central Government and
State Governments
(iv) Accounts attached by orders of Central or State governments/regulatory
body/Courts/investigating agencies etc. wherein the customer cannot
undertake any discretionary debits
5. With reference to FAQ 18 of the circular dated December 14, 2020, in line with
FAQ 9, banks maintaining collection accounts are permitted to debit fee/charges from
such accounts before transferring the funds to the escrow account/CC/OD account of
the borrower.
6. With reference to para 3 of the circular dated December 14, 2020 read with FAQ
17, it is clarified 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.
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.
7. Banks may implement the necessary changes within one month from the date of
this circular. The compliance position thereon will be reviewed thereafter.8. A consolidated self-contained circular on the subject will be issued soon.
9. All other instructions contained in the circulars ibid remain unchanged.
Yours faithfully,
(Manoranjan Mishra)
Chief General Manager