RBI eases current account rules for borrowers with bank exposures of less than Rs 5 cr

The Reserve Bank of India (RBI) on Friday introduced certain tweaks to ease the current account rules for borrowers with bank exposures of less than Rs 5 crore. In such cases, banks can open a current account or cash credit or overdraft facilities without any curbs.

As per the RBI circular issued today, for borrowers whose exposure to the banking system is less than Rs 5 crore, there's no restriction on the opening of current accounts. They'll also not face any curbs on the provision of cash credit or overdraft facilities by banks. Banks have been directed to make such changes in a month.

Banks, however, will have to obtain an undertaking from such borrowers that they will inform them when their credit facilities will reach Rs 5 crore or more.

Borrowers, whose exposure to the banking system is Rs 5 crore or more, can maintain current accounts with one of banks with which they have cash credit or overdraft facility, provided the bank has at least 10 per cent of the exposure to the borrower.

As per the RBI circular, other lending banks may open only collection accounts, provided funds deposited in them will be remitted in two working days of receiving such funds to the cash credit or overdraft account maintained with the bank.

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"In case none of the lenders has at least 10 per cent exposure of the banking system to the borrower, the bank having the highest exposure may open current accounts. Non-lending banks are not permitted to open current accounts," the RBI said.

Borrowers not availing of cash credit or overdraft facility from the banking system will continue to maintain current accounts as per the RBI's guidelines issued on August 6, 2020.

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Banks are permitted to open or maintain accounts such as inter-bank accounts, accounts of All India Financial Institutions (EXIM Bank, NABARD, NHB, and SIDBI) accounts opened under orders of the Centre and states, and accounts attached by government or government bodies or courts or agencies wherein the customer cannot undertake any discretionary debits. They can be opened or maintained without any curbs placed under the circular dated August 6, 2020.

The Reserve Bank in August had allowed time to banks till October 31 to implement changes on the current account front, following reports of small businesses being hit with account freezes in the last few days. The central bank had said its circular was aimed at enforcing credit discipline amongst the borrowers as well as to facilitate better monitoring by the lenders but made it clear that a "graded approach" had been prescribed to banks on opening and operating of current accounts and cash credit/overdraft CC/OD facilities.

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