**Executive Summary**
These Amendment Directions, issued by the Reserve Bank of India on December 11, 2025, modify the "Opening of Current Accounts and CC / OD Accounts by Banks" section of the Reserve Bank of India (Regional Rural Banks – Credit Risk Management) Directions, 2025. The amendments introduce a new Chapter VIA focused on the maintenance of Cash Credit (CC), Current, and Overdraft (OD) accounts by banks. These amendments are effective from April 1, 2026, with the option for banks to implement them earlier.
**Key Points / Main Content**
* **Chapter VIA: Maintenance of Cash Credit Accounts, Current Accounts and Overdraft Accounts by Banks**
* Current, CC, and OD accounts can be used as transaction accounts, but this raises concerns about credit monitoring. This chapter provides a framework for maintaining such accounts.
* **Cash Credit Accounts**
* CC accounts are differentiated from current or OD accounts due to their nature as working capital facilities linked to the borrower's current assets.
* **Current Accounts and OD Accounts**
* Banks can maintain current/OD accounts without restriction if the banking system's aggregate exposure to the customer is less than ₹10 crore.
* For customers with exposure of ₹10 crore or more, a bank can maintain accounts if it has either:
* A minimum 10% share in the banking system's aggregate exposure; or
* A minimum 10% share in the banking system's aggregate fund-based exposure.
* If no bank meets the above criteria, the two banks with the largest exposures can maintain accounts.
* If only one bank has any exposure, one more bank of the customer’s choice may maintain accounts.
* Borrowers desiring a current account with a Scheduled Commercial Bank (SCB) when no SCB meets the criteria must furnish NOCs from all lending banks.
* Banks not meeting the above criteria can only maintain collection accounts.
* **Collection Accounts**
* Funds credited into a collection account must be remitted within two working days to a designated CC, current, or OD account.
* Disbursements from an OD account in the nature of a collection account must be through the designated account.
* Statutory dues can be debited before remitting the funds.
* **Exemptions**
* Restrictions do not apply to:
* Accounts opened per the Foreign Exchange Management Act (FEMA), 1999.
* Specific accounts or transactions stipulated under a statute or regulator instruction.
* Accounts of entities regulated by a financial sector regulator.
* Banks operating exempted accounts must ensure transactions are only for permitted purposes and remit surplus funds to a designated account.
* **Compliance Monitoring**
* Banks must monitor accounts at least once every half-year to ensure ongoing compliance.
* If a bank is no longer eligible to maintain an account, it must notify the customer within one month and convert or close the account within three months.
* Accounts opened under these Directions must be flagged in the bank's core banking solution (CBS).
* Banks must monitor accounts and transactions at both the borrower and account levels.
* **Other Provisions**
* Accountholders must use accounts solely for authorized business activities. Accounts cannot be used as pass-through channels for third-party transactions.
* Entities licensed by a financial sector regulator can continue third-party transactions within authorized limits.
* Banks must ensure accountholders not licensed to accept deposits or provide payment services do not engage in such activities.
* Robust monitoring systems are required to detect prohibited usage.
* Term loans should preferably be remitted directly to the beneficiary's account, not through the borrower's account.
* **Effective Date**
* Amendments are effective from April 1, 2026, but banks may choose to implement them earlier.
**Impact Analysis**
**Regional Rural Banks (RRBs)**
* **Impact**: RRBs need to adhere to the new guidelines for opening, maintaining, and monitoring current, CC, and OD accounts. This includes adjustments to CBS systems for flagging accounts and implementing monitoring mechanisms.
* **Action Required**: RRBs must update their internal policies and procedures, train staff on the new requirements, and ensure compliance with the new reporting and monitoring guidelines by April 1, 2026, or an earlier chosen date. They should also assess their existing customer base to identify accounts requiring conversion or closure.
**Borrowers/Customers of RRBs**
* **Impact**: Borrowers may face changes in how their current, CC, and OD accounts are managed, especially those with large exposures. They might need to provide NOCs or designate specific accounts for transactions.
* **Action Required**: Borrowers need to comply with requests from their banks for documentation, and adhere to guidelines for utilizing their accounts. Borrowers should be aware that their bank may need to close or convert their account if they are not in compliance.
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for issuing the amendment directions.
Reserve Bank of India (Regional Rural Banks – Credit Risk Management) Directions, 2025: The original directions being amended, providing a framework for credit risk management in Regional Rural Banks.
Banking Regulation Act, 1949: The Act which empowers the Reserve Bank of India to issue directions to banks.
भारतीय ररज़र्व बैंक
RESERVE BANK OF INDIA
RBI/2025-26/145
DOR.CRE.REC.351/07-02-004/2025-26 December 11, 2025
Reserve Bank of India (Regional Rural Banks – Credit Risk Management)
– Amendment Directions, 2025
Please refer to Reserve Bank of India (Regional Rural Banks – Credit Risk
Management) Directions, 2025 dated November 28, 2025 (hereinafter referred to as
‘the Directions’).
2. On a review, in exercise of the powers conferred by the sections 21 and 35A of
the Banking Regulation Act, 1949 and all other provisions / laws enabling the Reserve
Bank of India (hereinafter called the Reserve Bank) in this regard, the Reserve Bank
being satisfied that it is necessary and expedient in the public interest so to do, hereby
issues the Amendment Directions hereinafter specified.
3. The Amendment Directions modifies the Directions as under:
(1) Chapter VI – ‘Opening of Current Accounts and CC / OD Accounts by
Banks’ of the Directions shall be deleted and substituted with a new chapter
as under:
Chapter VIA - Maintenance of Cash Credit Accounts, Current
Accounts and Overdraft Accounts by Banks
39A. Current Accounts, Cash Credit Accounts (CC), and Overdraft
Accounts (OD) may all be used as transaction accounts by the
customers, which raises concerns relating to credit monitoring by the
lenders. With a view to strengthening credit discipline and facilitating
better monitoring of transactions and utilisation of funds, this Chapter
provides a framework for maintaining such accounts banks.
A. Cash Credit Accounts
39B. CC account is operationally different from a current account or
OD account, given its primary nature as a working capital facility linked
to the value of the borrower's current assets. A bank may provide suchReserve Bank of India (Regional Rural Banks – Credit Risk Management) – Amendment Directions, 2025
cash credit facilities as per the needs of the customer, without any
restriction under this Chapter.
B. Current Accounts and OD Accounts
39C. A bank may maintain current account or OD account without any
restriction in cases where the aggregate exposure of the banking
system to the customer is less than ₹10 crore.
Explanation (1): ‘Banking System’ for the purpose of this Chapter shall
include Commercial Banks (including Small Finance Banks, Local Area
Banks, and Regional Rural Banks, but excluding Payments Banks),
Urban Co-operative Banks and Rural Co-operative Banks (State Co-
operative Banks and Central Co-operative Banks).
Explanation (2): ‘Exposure’ for the purpose of this Chapter means the
sum of all sanctioned fund-based credit facilities and non-fund-based
facilities availed by the borrower from the banking system.
39D. In case of customers to whom the exposure of the banking system
is ₹10 crore or more:
(1) A bank may maintain current accounts or OD accounts as per the
needs of the customer provided that the bank has either:
(i) A minimum 10 per cent share in banking system’s aggregate
exposure to the borrower; or
(ii) A minimum 10 per cent share in banking system’s aggregate
fund-based exposure to the borrower;
Provided that, in case no bank within the banking system meets the
above criteria, or only one bank meets the above criteria, two banks
from the banking system having the largest exposures to the borrower
may maintain current accounts or OD accounts.
Provided further that, in case where only one bank within the banking
system has any exposure to the borrower, one more bank of the
customer’s choice within the banking system may maintain current
2Reserve Bank of India (Regional Rural Banks – Credit Risk Management) – Amendment Directions, 2025
accounts, subject to furnishing of a no-objection certificate (NOC) from
the bank that has the exposure to the borrower.
Provided further that, in case where no Scheduled Commercial Bank
(SCB) meets the above criteria, but the borrower nevertheless desires
to have a current account with an SCB, such borrowers may maintain
current accounts with any one SCB of their choice, subject to furnishing
of NOCs from all lending banks within the banking system.
(2) A bank, not meeting the eligibility criteria at paragraph (1) above ,
may maintain only collection accounts.
Explanation: ‘Collection Account’ for the purpose of this Chapter
means a current account or OD account used primarily for receipts
of cash inflows of the accountholder. Restricted payments / cash
outflows from such account shall be subject to the conditions
outlined in paragraph 39F of these Directions.
39E. With a view to ensuring credit discipline, lenders may include
additional covenants as per their policies in their loan agreements in
mutual agreement with borrowers.
C. Collection Accounts
39F. Funds credited into a collection account shall be remitted within
two working days of receipt of such funds to a CC account, current
account, or OD account maintained with any bank in the banking
system and designated by the borrower for this purpose (hereinafter
referred to as ‘designated account’ in this Chapter). Any disbursement
of overdraft limit from an OD account, which is in the nature of a
collection account, shall be through the designated account only.
Provided that statutory dues such as taxes, and dues, if any, to the
bank maintaining the collection account may be debited before
remitting the funds.
D. Exemptions
39G. The restrictions placed in terms of paragraph 39D(1) of these
Directions shall not be applicable to the accounts mentioned below:
3Reserve Bank of India (Regional Rural Banks – Credit Risk Management) – Amendment Directions, 2025
(1) Accounts opened as per the provisions of Foreign Exchange
Management Act, 1999 (FEMA) and notifications issued
thereunder, including accounts mandated for ensuring compliance
under the FEMA framework.
(2) Specific accounts or transactions which are stipulated under a
statute or a specific instruction of a financial sector regulator, or the
Central Government or a State Government.
Explanation: ‘Financial sector regulator’ for the purpose of this
Chapter refers to the Reserve Bank of India (RBI), the Securities
and Exchange Board of India (SEBI), the Insurance Regulatory and
Development Authority of India (IRDAI) and the Pension Fund
Regulatory and Development Authority (PFRDA).
(3) Accounts of entities regulated by a financial sector regulator, used
for the purpose of carrying out their regulated activities.
Provided that banks operating the above-mentioned exempted
accounts shall ensure that transactions in such accounts are used only
for the permitted / specified purposes. Surplus funds, if any, in such
accounts shall be remitted to the designated account.
E. Compliance Monitoring
39H. For the purpose of ensuring ongoing compliance with this
Chapter, all banks shall monitor accounts maintained with them on a
regular basis, and in any case at least once every half-year.
39I. In case it is observed that a bank is no longer eligible to maintain
a current account or OD account opened in terms of:
(1) paragraph 39C due to increase in exposure of banking system to
the borrower up to or beyond the specified threshold of ₹10 crore;
or
(2) paragraph 39D(1), due to changes in the bank’s share in banking
system’s aggregate exposure or in aggregate fund-based exposure
to the borrower; or due to non-availability of NOC from banks that
have exposure to the borrower.
4Reserve Bank of India (Regional Rural Banks – Credit Risk Management) – Amendment Directions, 2025
then the bank shall notify the customer(s) concerned promptly, and in
any case within one month from the date of observing such ineligibility,
that the account must either be converted to a collection account or
closed. The conversion or closure process, as the case may be, shall
be completed within three months of observing such ineligibility.
39J. Accounts opened in terms of these Directions shall be
appropriately flagged in the bank’s core banking solution (CBS) to
ensure clear identification and to facilitate effective monitoring. Banks
maintaining multiple accounts for a borrower shall ensure that such
accounts and transactions and cashflows therein are monitored at the
borrower level as also at the account level.
F. Other Provisions
39K. A bank shall ensure that an accountholder utilise their account
solely for transactions related to their authorised business or activities.
These accounts shall not, under any circumstances, be used as pass-
through channels for facilitating third-party transactions.
Provided that entities expressly licensed or authorised by a financial
sector regulator to facilitate third-party transactions may continue to do
so. However, such activities shall strictly be limited to the specific
transactions they are authorised to do and shall not extend beyond that
scope. Any account that has been permitted to carry out such third-
party transactions shall be appropriately flagged in the bank’s CBS to
ensure clear identification and to facilitate effective monitoring.
39L. A bank shall ensure that an accountholder, who is not licensed or
authorised by the Reserve Bank to accept deposits or to provide
payment services, do not engage in such activities through accounts
maintained with them.
39M. Robust monitoring systems shall be implemented to detect the
above prohibited usage, including mechanisms to flag accounts
exhibiting unusually high transaction volumes, frequent pass-through
5Reserve Bank of India (Regional Rural Banks – Credit Risk Management) – Amendment Directions, 2025
activities, or inconsistencies between the accountholder’s stated line of
business and transactions carried out through the account.
39N. Term loans sanctioned by the bank shall preferably be remitted
directly to the intended beneficiary’s account(s) or for the specified end-
use, where such beneficiary is identifiable, rather than routing the funds
through the borrower’s account.
4. The above amendments shall come into force from April 1, 2026. Banks may
however decide to implement the amendments in entirety from an earlier date.
Vaibhav Chaturvedi
(Chief General Manager)
6