Background
In October 2025, the Reserve Bank of India (RBI) released the draft Transaction Accounts Directions, proposing a stricter regime for borrowers with large credit exposures. Under the draft, banks will not be allowed to open multiple current, cash credit (CC), or overdraft (OD) accounts for borrowers with an aggregate exposure of ₹10 crore or more across the banking system. Instead, such borrowers must route all their “transaction flows through a designated “operating bank,” with limited exceptions for collection and escrow arrangements.
Context and Rationale
The proposal builds on RBI’s 2020–21 current account discipline framework, which sought to prevent fund diversion by limiting multiple operative accounts. The new draft refines that framework based on industry feedback, aiming to strike a balance between credit discipline and operational flexibility. The overarching goal remains: to ensure visibility and control over borrower cash flows while enabling smoother business operations.
What Exactly Is Proposed
*Threshold: Borrowers with exposure of ₹10 crore or more across the banking system cannot maintain multiple operative accounts.
* Single Operating Bank: All payments and receipts must be routed through one designated operating bank (usually a main lender). Other banks may open collection accounts that sweep funds to the main account within a prescribed period.
* Limited Exceptions: Escrow and collection accounts are still permitted, ensuring continuity for treasury, receivables, and project-specific cash management.
How It Differs from the Existing Framework
* The earlier threshold was ₹5 crore, with rules such as a 10% exposure criterion for the operating bank and **two-day sweeps** from collection accounts.
* The new draft raises the limit to ₹10 crore and simplifies the structure — replacing fragmented rules with a clear “no multiple operative accounts” principle, while offering more flexibility than the 2020 version.
Implications for Corporates
* Cash Management: Centralising transactions may require changes in ERP integration, pooling structures, and sweeping mechanisms. Existing current accounts may need to be closed or converted to collection/escrow accounts.
* Banking Relationships: Companies with multi-bank setups will have to consolidate operative flows with one main bank, leaving others with lending or collection-only roles.
* Compliance Evidence: Borrowers will need to provide exposure declarations, lender confirmations, and sweep documentation to demonstrate compliance.
Implications for Banks
* Operating Bank Advantage: The designated bank gains deeper transaction visibility, aiding credit monitoring, cross-sell opportunities, and early warning systems.
* Non-Operating Lenders: Must ensure their collection accounts remain non-operative and that funds sweep promptly to the designated account.
* System Monitoring: Banks must align internal MIS with CRILC/CIC data and embed stronger covenants to enforce routing discipline.
Transitional Actions to Plan Now
* Map Exposures: Identify borrower groups with system-wide exposure ≥₹10 crore and designate the operating bank.
* Rationalise Accounts: Prepare a plan to close surplus current accounts or migrate them to collection/escrow status with automated T+2 sweeps.
* Update Mandates: Revise board-approved policies, covenants, and borrower undertakings in line with the draft directions.
Key Compliance Checkpoints
* Designation Letter: Formal documentation of the chosen operating bank for each eligible borrower.
* Sweep SLAs: System-enforced sweep timelines (e.g., T+2 days) from collection to operating accounts.
* Ongoing Surveillance: Regular certification that no other operative accounts exist, with monitoring of exceptions for escrow structures.
What Remains Unchanged in Spirit
RBI’s central goal remains end-to-end transparency of borrower cash flows and prevention of fund diversion, albeit with a more flexible, feedback-driven design than its 2020 iteration.
Why Private Banks Were Unhappy with RBI’s Draft Rules
1. Business Overlap Restriction:
The draft proposed that only one entity in a banking group could offer a specific loan type, preventing banks and their NBFC subsidiaries from running similar businesses like personal or car loans.
2. Profitability and Valuation Impact:
Leading private banks (HDFC, ICICI, Axis, Kotak, Federal) rely heavily on their NBFC subsidiaries, which add significant value to their overall business. The rule would have forced costly restructuring and hurt profitability and market valuations.
3. Operational Challenges:
Restructuring long-integrated operations would have been complex and disruptive.
4. Regulatory Intent vs. Industry Concern:
While the RBI aimed to curb regulatory circumvention through group entities, banks argued that subsidiaries already operated under separate NBFC norms, making the rule unnecessarily harsh.
Outcome:
The RBI later addressed these concerns in its final guidelines, providing relief to the banks by removing the strict restriction on business overlap, thereby resolving the private banks’ unhappiness.
