RBI exempts borrowers with less than Rs 5-crore bank loans from ambit of current accounts circular

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October 30, 2021 5:00 AM

FE had reported on September 4 that the Indian Banks’ Association (IBA) had requested the RBI to exempt accounts held by the government with various banks from the purview of the August 6 circular.

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

The Reserve Bank of India (RBI) on Friday announced a series of tweaks to its August 6, 2020, current accounts circular, exempting borrowers with less than Rs 5 crore of banking system exposure from its ambit. The regulator also exempted accounts opened under specific instructions of the central and state governments from meeting the restrictions under the circular.

FE had reported on September 4 that the Indian Banks’ Association (IBA) had requested the RBI to exempt accounts held by the government with various banks from the purview of the August 6 circular.

In a notification on its website, the central bank said that the changes to the circular were made on a review taking into account feedback received from the IBA and other stakeholders. “For borrowers, where the exposure of the banking system is less than Rs 5 crore, there is no restriction on opening of current accounts or on provision of CC/OD (cash credit/ overdraft) facility by banks, subject to obtaining an undertaking from such borrowers that they shall inform the bank(s), as and when the credit facilities availed by them from the banking system reaches Rs 5 crore or more,” the RBI said.

Borrowers to whom the exposure of the banking system is Rs 5 crore or more will be allowed to maintain current accounts with any one of the banks with which it has CC/OD facility, provided that the bank has at least 10% of the exposure of the banking system to that borrower. Further, other lending banks may open only collection accounts subject to the condition that funds deposited in such collection accounts will be remitted within two working days of receiving such funds, to the CC/OD account maintained with the bank maintaining current accounts for the borrower.

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

Three other categories of accounts will also be exempted from the restrictions under the circular. These include inter-bank accounts, accounts of all India financial institutions (AIFIs) EXIM Bank, NABARD, NHB and SIDBI, and accounts attached by orders of central or state governments, regulatory bodies, courts or investigating agencies where the customer cannot undertake any discretionary debits.

“…it is clarified that banks shall monitor all accounts regularly, at least on a half-yearly basis, specifically with respect to the exposure of the banking system to the borrower, and the bank’s share in that exposure, to ensure compliance with these instructions,” the RBI said. If there is a change in exposure of banks or aggregate exposure of the banking system to the borrower which warrants implementation of new banking arrangements, such changes shall be implemented within a period of three months from the date of such monitoring, the regulator added.

Banks may implement the necessary changes within one month, after which the RBI will review the compliance position thereon.

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