RBI temporarily postpones circular on current account till December 5

As part of its monetary policy on August 6, it said no bank can open current account for a customer who has availed cash credit or overdraft from other banks

The Reserve Bank of India (RBI) has deferred banks’ current account maintenance norm till December 15, from November 5, pending a frequently asked question that the central bank would publish on its website.

As part of its monetary policy on August 6, the central bank said no bank can open current account for a customer who has availed cash credit or overdraft facility from others in the banking system, and from now on, all transactions will now have to be routed through the cash credit, or overdraft account.

The RBI said banks should not route withdrawal from term loans through current accounts. Instead, the funds should be remitted directly to the supplier of goods and services. Expenses incurred by the borrower for day to day operations should be routed through cash credit or overdraft account, if the borrower has one, otherwise current account can be opened.

Several banks, mostly private and foreign banks had lobbied against these directives, asking the central bank to reconsider the rule.

“We have since received several references from banks seeking clarifications on operational issues regarding maintenance of current accounts already opened by the banks. These references are being examined by the Reserve Bank and will be clarified separately by means of a FAQ,” said the central bank in a statement on its website.