Small business suffer as banks shut current accounts after RBI circular

State-owned lenders welcome 'need for discipline' but their private competitors say business is suffering

The Reserve Bank of India's (RBI) circular to banks for the ‘need for discipline’ led to closure of a large number of current accounts when the deadline for compliance ended July 31.

Micro, small and medium enterprises (MSME) are the worst hit due to the account freeze, bankers and industry officials said about the circular issued on August 6 last year.

Interestingly, the move has created a rift between the public and private sector banks: the first lot welcomed the move and the second said they would lose customers.

The circular said that a bank cannot open a current account