Current Account Facility Only For Banks, Co-ops, PDs

Mumbai, April 29: | Updated: Apr 30 2002, 05:30am hrs
The Reserve Bank of India (RBI) on Monday decided that current account facility may be extended only to scheduled commercial banks, scheduled co-operative banks and primary dealers (PDs). Current account facility for entities other than those indicated above would be phased out in due course.

Said HSBC’s treasurer, India (treasury and capital markets), Tarun Mahrotri: “This step goes to address RBI’s stated stand of moving towards a pure inter-bank money market. It is more of a procedural step taken towards meeting this objective and is central to the eventual phasing out of non-bank participants from the interbank market.”

According to Development Credit Bank’s head-treasury, Harihar Krishnamoorthy: “This is a step, which will speeden up the process of getting everybody in the market to conduct their G-Sec and call money market transactions through the Negotiated Dealing System (NDS) and Clearing Corporation of India (CCIL) totally obviating the need to issue and receive cheques. This is also to be seen in the light of the fact that banks have been instructed separately by the RBI to compulsorily become members of the NDS. This will ensure that the market becomes an orderly one where participants can safely assume settlement of all concluded deals.”

A programme for phasing out current account facility in respect of all India financial institutions will be chalked out concurrently and at a later stage, depositories like National Securities Depository Ltd, Central Despository Services Ltd and other custodians like the Stock Holding Corporation of Indua Ltd will also be phased out and they can then operate through banks. This has been done to ensure that current account facility with the RBI serves its core objectives.

As indicated in the Mid-term Review of October last year, an internal group had been set up to rationalise the present policy of access to current account facility provided by the RBI in view of phasing out of non-banks from call and the notice money market, upgradation of payment system infrastructure such as operationalisation of CCIL and NDS and operations of OMO/LAF only through banks and PDs. These would obviate the need of non-bank entities to have access to current account with RBI.