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Vikash Sharma

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  • RBI had prescribed a graded approach on opening and operating of current accounts and Cash credit (CC) or overdraft (OD) by banks.

The Reserve Bank of India (RBI) has issued guidelines for implementation of its circular on opening of current accounts by banks.

As per a revised notice issued on Wednesday, the RBI has given banks three more months, to implement the new rules on opening current accounts. The deadline expired on October 31, 2021.

Earlier, the RBI had issued instructions regarding the circular in order to enforce credit discipline amongst the borrowers as well as to facilitate better monitoring by the lenders and for this purpose, a graded approach was prescribed on opening and operating of current accounts and Cash credit (CC) or overdraft (OD).

“We received requests from the banks for some more time to resolve the operational issues while implementing the circular in letter and spirit. Therefore, in order to ensure that the instructions are implemented in a non-disruptive manner, it has been decided that banks will be permitted time till October 31, 2021 to implement the provisions of the circular. This extended time line shall be utilised by banks to engage with their borrowers to arrive at mutually satisfactory resolutions within the ambit of the circular,” said RBI.

The RBI has reiterated that: In case of borrowers who have not availed of CC/OD facility from any bank, there is no restriction on opening of current accounts by any bank if exposure of the banking system to such borrowers is less than Rs 5 crore.

In case of borrowers who have not availed of CC/OD facility from any bank and the exposure of the banking system is Rs 5 crore or more but less than Rs 50 crore, there is no restriction on lending banks to such borrowers from opening a current account. Even non-lending banks can open current accounts for such borrowers though only for collection purposes.

The restriction applies to borrowers in case they avail of CC/OD facility since all operations that can be carried out from a current account can also be carried out from a CC/OD account as banks in a CBS environment follow a one-bank-one-customer model as against a one-branch-one-customer model.

Apart from this, several issues which banks are unable to resolve themselves shall be escalated to Indian Banks’ Association (IBA) for appropriate guidance. Residual issues, if any, requiring regulatory consideration shall be flagged by IBA to the Reserve Bank for examination by September 30, 2021, the latest circular added.

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