RBI today (19.04.2022) issued a consolidated circular for the opening and operation of current accounts and CC/OD accounts by banks with a view to enforce credit discipline amongst the borrowers as well as to facilitate better monitoring by the lenders.
Banks may compute the aggregate exposure of the prospective customers based on the information collected from the Central Repository of Information on Large Credits (CRILC), Credit Information Companies (CICs), and National E-Governance Services Ltd. (NeSL), etc. by obtaining customers’ declaration if required.
Opening of current account for customers who have not availed of any credit facilities from the banking system:
According to the circular, Banks are free to open current accounts of prospective customers who have not availed any credit facilities from the banking system, subject to necessary due diligence as per their Board approved policies. Banks are also free to open current accounts, without any of the restrictions placed in the Circular, for borrowers having credit facilities only from NBFCs/ FIs/ co-operative banks/ non-bank institutions, etc. However, if such borrowers avail of aggregate credit facilities of Rs 5 crore or above from the banks covered under the guidelines and provisions of the RBI Circular as mentioned below shall be applicable.
Where the aggregate exposure of the banking system is below Rs 5 crore :
Banks can open current accounts for borrowers, where the aggregate exposure of the banking system is below Rs 5 crore subject to obtaining an undertaking from such customers that they (the borrowers) shall inform the bank(s), if and when the credit facilities availed by them from the banking system becomes Rs 5 crore or more.
Opening of account for borrowers where the aggregate exposure of the banking system is Rs 5 crore or more but less than Rs 50 crore:
In the case of borrowers where the aggregate exposure of the banking system is Rs 5 crore or more but less than Rs 50 crore, there is no restriction on the opening of current accounts by the lending banks. However, non-lending banks may open only collection accounts. The balances in such collection accounts shall not be used for repayment of any credit facilities provided by the bank, or as collateral/ margin for availing any fund or non-fund-based credit facilities. However, banks maintaining collection accounts are permitted to debit fees/ charges from such accounts before transferring funds to the escrow account.
Where aggregate exposure of the banking system is Rs 50 crore or more:
Current accounts of borrowers can only be opened/ maintained by the escrow managing bank. Other lending banks can open ‘collection accounts’ subject to the condition that funds will be remitted from these accounts to the said escrow account at the frequency agreed between the bank and the borrower. Further, balances in such collection accounts shall not be used for repayment of any credit facilities provided by the bank, or as collateral/ margin for availing any fund or non-fund-based credit facilities. While there is no prohibition on the amount or number of credits in ‘collection accounts’, debits in these accounts shall be limited to the purpose of remitting the proceeds to the said escrow account. However, banks maintaining collection accounts are permitted to debit fees/ charges from such accounts before transferring funds to the escrow account.
Restriction on the opening of current /collection accounts by non-lending banks:
Non-lending banks are not permitted to open current/ collection accounts. Borrowers can open current accounts with any one of the banks with which it has a CC/OD facility, provided that the bank has at least 10 per cent of the aggregate exposure of the banking system to that borrower. In case none of the lenders has at least 10 per cent of the aggregate exposure, the bank having the highest exposure among CC/OD-providing banks may open current accounts without any restriction. While credits are freely permitted, debits to the CC/OD account can only be for credit to the CC/OD account of that borrower with a bank that has 10 per cent or more of aggregate exposure of the banking system to that borrower. In case there is more than one bank having 10 per cent or more of the aggregate exposure, the bank to which the funds are to be remitted may be decided mutually between the borrower, and the bank’s Funds will be remitted from these accounts to the said transferee CC/OD account at the frequency agreed between the bank and the borrower. Further, the credit balances in such collection accounts shall not be used for repayment of any credit facilities provided by the bank, or as collateral/ margin for availing any fund or non-fund-based credit facilities. However, banks are permitted to debit interest/ charges pertaining to the said CC/OD account and other fees/ charges before transferring the funds to the CC/OD account of the borrower with the bank(s) having 10 per cent or more of the aggregate exposure. It may be noted that banks with exposure to the borrower of less than 10 per cent of the aggregate exposure of the banking system can offer a working capital demand loan (WCDL)/ working capital term loan (WCTL) facility to the borrower.
Banks should not route payments from term loans through the CC/ OD/ Current accounts of the borrower. This is because term loans are meant for specific purposes and therefore the funds should be remitted directly to the supplier of goods and services. Even in the cases where term loans are meant for purposes other than for the supply of goods and services banks shall ensure that payment is made directly to the destination without routing it through an account of the borrower. However, where the payment destination is not identifiable, banks may route such term loans through an account of the borrower opened as per the provisions of the RBI circular. Expenses incurred by the borrower for day-to-day operations may be routed through an account of the borrower.
Banks are permitted to open and operate specific accounts stipulated under various statutes and specific instructions of other regulators/ regulatory departments/ Central and State Governments, without any restrictions.
The specific accounts are;
- Accounts for real estate projects mandated under Section 4 (2) l (D) of the Real Estate (Regulation and Development) Act, 2016 for the purpose of maintaining 70 per cent of advance payments collected from the home buyers.
- Nodal or escrow accounts of payment aggregators/ prepaid payment instrument issuers for specific activities as permitted by the Department of Payments and Settlement Systems (DPSS), Reserve Bank of India under the Payment and Settlement Systems Act, 2007
- Accounts for the purpose of IPO/ NFO/ FPO/ share buyback/ dividend payment/ issuance of commercial papers/ allotment of debentures/ gratuity etc. which are mandated by respective statutes or by regulators and are meant for specific/ limited transactions only(b) Accounts opened as per the provisions of Foreign Exchange Management Act, 1999 (FEMA) and notifications issued thereunder including any other current account if it is mandated for ensuring compliance under the FEMA framework (c) Accounts for payment of taxes, duties, statutory dues, etc. opened with banks authorized to collect the same, for borrowers of such banks which are not authorized to collect such taxes, duties, statutory dues, etc.(d) Accounts for settlement of dues related to debit card/ ATM card/ credit card issuers/ acquirers (e) Accounts of White Label ATM Operators and their agents for sourcing of currency (f) Accounts of Cash-in-Transit (CIT) Companies/ Cash Replenishment Agencies (CRAs) for providing cash management services (g) Accounts opened by a bank funding a specific project for receiving/monitoring cash flows of that specific project, provided the borrower has not availed any CC/OD facility for that project, (h) Inter-bank accounts, (i) Accounts of All India Financial Institutions (AIFIs), viz., EXIM Bank, NABARD, NHB, and SIDBI, (j) Accounts attached by orders of Central or State governments/ regulatory body/ Courts/ investigating agencies etc. wherein the customer cannot undertake any discretionary debits
However, Banks maintaining accounts listed above shall ensure that these accounts are used for permitted/ specified transactions only. Further, banks shall flag these accounts in the CBS for easy monitoring. Lenders to such borrowers may also enter into agreements/ arrangements with the borrowers for monitoring of cash flows/ periodic transfer of funds (if permissible) in these accounts.
Borrowers covered under Loan Delivery System:
In case of borrowers covered under guidelines on loan system for delivery of bank credit, bifurcation of the working capital facility into loan component and cash credit component shall continue to be maintained at individual bank level in all cases, including consortium lending
All banks, whether lending banks or otherwise, shall monitor all accounts regularly, at least on a half-yearly basis, specifically with respect to the aggregate exposure of the banking system to the borrower, and the bank’s share in that exposure, to ensure compliance with these instructions, the circular said.