Guidelines for the opening of Current Account by RBI

Guidelines for opening of Current Account by RBI

Reserve Bank of India (RBI) on August 6, 2020 vide circular no. RBI/2020-21/20 DOR. No. BP.BC/7/21.04.048/2020-21, issued revised Guidelines on Opening Current Account with Banks, key points of which are as follows-

1.       No Current Account, where Customer Availing Credit Facilities (CC/OD) from banking System

2.    In Case, customer not availed CC/OD facility from any Bank, Bank may open Current Account as under (Exposure from Banking System):

 We can easily understand the new guidelines for opening of Current through the following:

1.       Exposure of Rs. 50 crores or more

·         Opening of mandatory Escrow Account.

·         Current Accounts of such borrowers can only be opened/maintained by the escrow managing bank.

·         Lending banks can open “Collection Accounts”.

·         Balances in such accounts shall not be used as margin for availing any non-fund based credit facilities.

·         No limit on credits to these accounts, however debits shall be   limited to the purpose of remitting the proceeds to the said Escrow Account.

·         Non-lending banks shall not open any Current Account for such borrowers.

 2.       Exposure of the Banking System is Rs.5 crores or more but less than Rs.50crores

·         Lending banks can open “Current Accounts”.

·         Non-lending banks may open only “Collection accounts.”

3.       Exposure of the Banking System is less than Rs.5 crores

·         Banks may open Current Accounts subject to declaration/undertaking from customers that he shall inform the bank when his credit facilities from banking system exceed Rs. 5 crores or more.

 4.       No credit facilities from Banks:  Banks can easily open current account of customers.

 Monitoring Mechanism:

·         Quarterly monitoring of all Current/CC/OD Accounts, more attention to accounts with exposure limits so as to ensure necessary compliances with above requirements.

·         No routing of funds from Term Loan to Current A/c, since Term Loans are for specific purpose, funds should be remitted directly for the purpose.

·         Expenses incurred by the borrower for day to day operations should be routed through CC/OD account, if the borrower has a CC/OD account, else through a current account.

·         Banks shall ensure compliance with the above requirements for CC/OD and Current Accounts within a period of three months from the date of this circular