Earlier, the Reserve Bank of India had set a deadline of 31 July 2021.
The Reserve Bank of India (RBI) on Wednesday issued new guidelines for the implementation of the circular on the opening of current accounts by banks. The central bank has given banks time until October end to implement the new rules on current accounts issued last year in August. Earlier, RBI had set a deadline of 31 July 2021.
The instructions were issued 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 had been prescribed on opening and operating of current accounts and CC/OD facilities. Banks were required to implement these instructions in a non-disruptive manner while keeping the bonafide business requirements of the borrowers in mind, RBI mentioned.
Therefore, in order to ensure that the instructions are implemented in a non-disruptive manner, RBI decided that banks will be permitted time till October 31, 2021, to implement the provisions of the circular.
What RBI said?
In the case of borrowers who have not availed of the CC/OD facility from any bank, there is no restriction on the opening of current accounts by any bank if exposure of the banking system to such borrowers is less than Rs 5 crore.
In the 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.
We have in the meantime received requests from the banks for some more time to resolve the operational issues while implementing the circular in letter and spirit.
This extended timeline shall be utilised by banks to engage with their borrowers to arrive at mutually satisfactory resolutions within the ambit of the circular. Such 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.
Accounts of White Label ATM operators and their agents are exempt from the provisions of the Current Account. Since Cash-in-Transit (CIT) Companies/ Cash Replenishment Agencies (CRAs) essentially carry out a similar activity, the exemption would be applicable to these entities as well.
Banks shall put in place a monitoring mechanism, both at head office and regional/zonal office levels to monitor non-disruptive implementation of the circular and to ensure that customers are not put to undue inconvenience during the implementation process.
Also, banks are not permitted to open current accounts for borrowers who have availed agricultural/ personal Overdraft (OD) or OD against deposits.
Banks shall ensure that the contents of the circular are implemented in letter and spirit without causing undue inconvenience to their borrowers. All other instructions contained in the circulars ibid remain unchanged.
