Home / Industry / Banking /  Banks form task forces to tackle current a/c closure challenges

MUMBAI : Banks have formed internal task forces to navigate the maze of issues triggered by the Reserve Bank of India (RBI) order to close non-compliant current accounts, a person aware of the development said.

Lenders have set up individual task forces for the zones they operate in and one in their respective head offices. These committees will compile the list of problems they or their customers face in complying with the new norms.

In a circular in August 2020, RBI had said banks with little or no loan exposure cannot open a current account for borrowers, and existing non-compliant accounts had to be frozen. The directive was aimed at cracking down on attempts by borrowers using current accounts at non-lending banks to siphon off funds. RBI said banks with less than 10% of the banking system exposure to a particular borrower cannot open a current account.

“It is a multi-layered structure that each bank has formed for smooth implementation of the circular. At the lowest level is the zonal task force; then there is the one at bank headquarters, which escalates the unresolved cases to the Indian Banks’ Association (IBA). The banking sector lobby will go to the regulator with a consolidated list of problems and concerns," the person cited above said on condition of anonymity.

Before these task forces were formed, banks were individually approaching the regulator to resolve hurdles related to the current account circular.

On 4 August, after the original deadline of 31 July had lapsed, RBI gave banks time till 31 October to comply with its norms. Mint reported on 4 August that lenders are facing stiff resistance from government enterprises in their attempts to freeze non-compliant current accounts. The person cited above said RBI asked banks to try resolving their grievances through IBA.

“We are not closing down any government current accounts till RBI resolves the matter. Government enterprises have said they would blacklist us if we closed their current accounts, and we are not willing to take the risk and lose business. On the whole, the pace of closure of current accounts has slowed down since the extension of the deadline by three months," he said.

Meanwhile, a clutch of non-banks had approached the Kerala high court seeking relief against the RBI circular. On 12 August, RBI informed the Kerala high court in a case filed by Muthoot Fincorp that the extended timeline has to be utilized by banks to engage with borrowers to arrive at a mutually satisfactory resolution within the ambit of the circular.

“It is also stated in the circular that such issues which banks are unable to resolve themselves are to be placed before IBA for guidance, and any remaining issues are to be placed before RBI by 30 September," said the 12 August order.

In its interim order, the court said in the light of the circular, it was obvious that banks are not expected to take any coercive measure to close any current accounts till 31 October.

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