The Reserve Bank of India (RBI) on Thursday released the final guidelines on transaction account directions and introduced key relaxations while maintaining the overall principle-based framework. The draft norms, which were issued on October 1, covered transaction account operations across seven categories of regulated entities, including commercial banks, small finance banks, payments banks and co-operative banks.
CC accounts exclusion and exposure thresholds
One of the most notable changes in the final guidelines are the removal of restrictions on cash credit (CC) accounts. Banks had argued that limiting such accounts could hinder working capital flows to businesses. Accepting the concern, the RBI acknowledged that CC facilities function differently from current and overdraft accounts and therefore warranted exclusion from the restrictions.
The central bank has also eased the earlier proposal that allowed only two banks to maintain transaction accounts for borrowers with a banking system exposure of Rs 10 crore or more. The revised rule now permits any lending bank with more than 10% exposure to open a current or overdraft account for the borrower. In situations where no bank or only one bank meets this threshold, the two lenders with the largest exposure will be allowed to operate such accounts. This move is expected to give borrowers greater operational flexibility while ensuring that account operations remain closely tied to credit exposure.
RBI Holds Firm on Remittance Window
However, the RBI held firm on several other fronts. Despite industry requests for a longer remittance window, the requirement to transfer funds from collection accounts to designated transaction accounts within two working days remains unchanged. The regulator said that timely fund flow to lending banks is essential for credit discipline.
Similarly, banks’ appeals for exemptions from account closure or conversion timelines, especially in cases involving law enforcement directives, were not accepted. The RBI clarified that regulatory instructions always operate without prejudice to judicial orders, making additional provisions unnecessary.
Banks also raised concerns about the operational burden of monitoring transaction accounts, particularly around third-party payments and preventing misuse as unauthorised payment channels. The RBI declined to dilute these obligations, reiterating that internal systems and processes must be robust enough to ensure compliance.
Finally, broad requests for borrower-specific or exposure-specific exemptions were also turned down. The central bank noted that the framework has already been simplified and provides adequate flexibility while protecting the integrity of the credit ecosystem.
The guidelines will come into effect from April 1, however banks can implement these guidelines from an earlier date, the release said.
