Home / Industry / Banking /  Reserve Bank’s new current account rules put bankers, customers in a spot
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MUMBAI : After two extensions and revisions, the Reserve Bank of India’s (RBI’s) new norms on current account opening have once again left bankers and customers confused as many banks have already complied with the earlier deadline of 31 October, according to bankers.

RBI’s original guidelines had asked banks not to open current accounts for borrowers with little or no loan exposure. This led to banks closing many accounts especially those with exposure below 5 crore or freezing the accounts. However, under the new guidelines released last week, RBI has removed these restrictions and allowed banks to open current accounts with any borrower, where the exposure of the banking system is less than 5 crore.

“RBI’s new guidelines have come after a lot of documentation has already happened for closing these accounts. Small borrowers have been hit the most as we have closed these accounts. The larger accounts and government accounts have either been converted into CC/OD (cash credit/overdraft) accounts or collection accounts," said a senior banker with a large public sector bank.

“We will now have to do KYC (know your customer) all over again and open these accounts. Many of the customers would have revised their cash flow management and kept their current account with one bank," said another banker.

Banks and RBI had been in discussions to relax these norms since they were introduced in August 2020. These directives were aimed at cracking down on attempts by borrowers using current accounts at non-lending banks to siphon off funds.

The central bank had extended the original deadline of 31 July to 31 October after bankers expressed stiff opposition from customers and government enterprises in their attempts to freeze non-compliant current accounts. These agencies were threatening to stop doing government business with banks if they closed these accounts.

Under the revised circular, the Reserve Bank of India has also removed restrictions on all India financial institutions and accounts opened under specific instructions of central government and state governments.

However, restrictions still continue in the case of public sector enterprises.

Under the revised guidelines, borrowers with more than 5 crore exposure can 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.

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