RBI eases current account opening rules for exposure below Rs 5 cr

Rules changed after feedback from the Indian Banks' Association and other stakeholders, says the regulator

In a relief to small-size firms, the Reserve Bank of India (RBI) on Friday relaxed rules for opening current accounts with the banking system’s exposure of less than Rs 5 crore. The RBI asked banks to take an undertaking from borrowers that they will inform lenders when the credit facilities availed reaches Rs 5 crore or more.

The rules have been tweaked based on feedback received from Indian Banks’ Association (IBA) and other stakeholders, the RBI said.

Borrowers with banking system’s exposure of Rs 5 crore or more can maintain current accounts with any one of the banks with which it has CC/OD facility. Such banks must have at least 10 per cent of the exposure of the banking system to that borrower.

Further, other lending banks may open only collection accounts, the RBI said. This can be done on condition that funds deposited in such accounts are remitted within two working days of receiving these to the CC/OD account.

The bank having the highest exposure may open current accounts when no lender has at least 10 per cent exposure to the borrower. Non-lending banks are not permitted to open current accounts. Borrowers who are not availing CC/OD facility will continue to maintain current accounts in line with present rules. 

Illustration: Binay Sinha

Further, banks will not face any curbs in opening and maintaining interbank accounts, accounts opened under specific instructions of the central government and state governments. Banks have to ensure that these accounts are used for permitted/specified transactions only. Further, banks will be required to flag these accounts in the core banking system for easy monitoring.

Lenders to such borrowers may also enter agreements or arrangements with borrowers for monitoring of cash flows/periodic transfer of funds (if permissible) in these current accounts. There will not be curbs on accounts attached by orders from the central or state governments, regulatory body, courts and investigating agencies. The RBI said banks have to monitor all accounts regularly, at least on a half-yearly basis, specifically for the exposure of the banking system to the borrower, and the bank’s share in that exposure. 

If there is any change in exposure of banks to the borrower which warrants new banking arrangements, such changes shall be implemented within three months from the date of monitoring.