RBI scraps plan to limit corporate current accounts to two big lenders

The RBI's draft proposal on current accounts for companies, released on 1 October, triggered a pushback from private sector banks.

On 11 November, Mint had reported that private banks had argued that the proposed norms would effectively tilt the playing field in favour of public sector banks, which dominate consortium lending and, therefore, enjoy higher exposure shares.

The proposal had also raised concerns around customer choice, digital transaction efficiency, and the adverse impact on private sector banks’ low-cost deposits.

However, the final RBI directions issued across commercial banks, small finance banks, payments banks, local area banks, regional rural banks, and cooperative banks have removed this cap entirely, indicating the regulator has acknowledged the banking industry's concerns.

In a statement on Thursday, the RBI said it has examined stakeholder views and incorporated modifications accordingly, while publishing a detailed statement explaining its decisions.

A bank may maintain current account or overdraft (OD) account without any restriction in case of customers where the aggregate exposure of the banking system to the customer is less than ₹10 crore.

According to the RBI, a bank may maintain current accounts or OD accounts as per the needs of the customer provided that the bank has either a minimum 10% share in banking system’s aggregate exposure to the borrower; or a minimum 10% share in banking system’s aggregate fund-based exposure to the borrower.

In case where only one bank within the banking system has any exposure to the borrower, one more bank of the customer’s choice within the banking system may maintain current accounts, subject to a no-objection certificate (NOC) from the bank that has the exposure to the borrower.

“Provided further that, in case where no Scheduled Commercial Bank (SCB) meets the above criteria, but the borrower nevertheless desires to have a current account with an SCB, such borrowers may maintain current accounts with any one SCB of their choice, subject to furnishing of NOCs from all lending banks within the banking system," RBI said.

The central bank also said that lenders may include additional covenants as per their policies in their loan agreements in mutual agreement with borrowers.

Bankers familiar with earlier discussions described the draft rule as restrictive and potentially disruptive for corporates. Private lenders had warned that limiting current accounts to only two high-exposure banks would have led to a concentration of transaction banking flows with public-sector lenders, altering the distribution of the ₹22.8 trillion current-account market and impacting fee income and liquidity positions.

In FY25, banks in India had ₹22.8 trillion in current account deposits, 38% of which was parked in state-owned banks, as per RBI data. Private banks and foreign banks had 44.7% and 16.2%, respectively.

They had also pointed out that large corporates often require multiple operational accounts for business needs and digital cash-management solutions, areas where private banks are typically stronger.

The new guidelines are significant, as they also impact corporate borrowers directly because the current account rules over the last few years affected working-capital financing.

The new guidelines rationalize how all categories of banks maintain transaction accounts and link them more tightly with credit risk management norms.

This is consistent with RBI’s long-standing objective of preventing fund diversion and strengthening monitoring of borrower cash flows issues that originally prompted the regulator to tighten current-account rules in 2020.