RBI revises cash credit and overdraft norms to boost monitoring, discipline

The Reserve Bank of India has introduced revised norms governing cash credit, current and overdraft accounts, aiming to give banks greater operational flexibility while strengthening credit discipline

Reserve Bank of India today issued revised norms to provide greater flexibility to banks for opening and maintaining cash credit accounts, current accounts and overdraft accounts. These accounts are predominantly used for business and commercial transactions.

 

Why has the RBI introduced a new chapter on account maintenance?

 

The revised direction has a new chapter — Maintenance of Cash Credit Accounts, Current Accounts and Overdraft Accounts — to strengthen credit discipline and facilitate better monitoring of transactions and utilisation of funds. These accounts may be used as transaction accounts by customers, which raises concerns relating to credit monitoring by lenders.

 

How were the final norms shaped?

 

On October 1, 2025, RBI had released the draft directions for primarily rationalising the existing provisions. The feedback received from banks and other stakeholders has been examined and the consequent modifications have been suitably incorporated in the final directions, RBI said in a statement.

 

How does the RBI differentiate between cash credit and other accounts?

 

Cash credit account is operationally different from a current account or OD account, given its primary nature as a working capital facility. This is linked to the value of the borrower’s current assets. A bank may provide cash credit facilities as per the needs of the customer, without any restriction.

 

What limits apply to current and overdraft accounts?

 

A bank may maintain a current account or OD account without any restriction for customers where the aggregate exposure of the banking system to the customer is less than Rs 10 crore, RBI added.

 

How will collection accounts be treated under the revised norms?

 

Banks can maintain collection accounts, also known as current accounts or OD accounts used primarily for receipts of cash inflows of the account holder. The restricted payments and cash outflows from such accounts are subject to certain conditions.