The instructions on the opening of current accounts by banks have been reviewed and revised by RBI and the same was notified to all the banks for compliance through their circular dated August 6, 2020. In terms of the above circular, no bank shall open current accounts for customers who have availed credit facilities in the form of cash credit (CC)/ overdraft (OD) from the banking system, and all transactions shall be routed through the CC/OD account. Further on November 2, RBI announced that banks may ensure compliance with the instructions contained in their Circular dated August 6, is extended up to December 15, 2020. It also said that Banks should not route drawal from term loans through current accounts, as term loans are meant for specific purposes, the funds should be remitted directly to the supplier of goods and services. Expenses incurred by the borrower for day to day operations should be routed through CC/OD account if the borrower has a CC/OD account, else through a current account. Responding to banks’ queries on how they must determine the aggregate exposure of the banking system to a borrower, the RBI said they might compute the aggregate exposure for the purpose of these guidelines based on the information available with the Central Repository of Information on Large Credits (CRILC), credit information companies (CICs), National E-Governance Services (NeSL), and by obtaining customers’ declaration if required.
On a review of its August 6, 2020 circular, RBI exempted the following seven categories of current accounts from the definition of ‘aggregate exposure’ within the ambit of the above circular.
- 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% 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 Department of Payments and Settlement Systems (DPSS), Reserve Bank of India under Payment and Settlement Systems Act, 2007.
- Accounts for settlement of dues related to debit card/ATM card/credit card issuers/acquirers.
- Accounts permitted under FEMA, 1999.
- Accounts for the purpose of IPO / NFO /FPO/ share buyback /dividend payment/issuance of commercial papers/allotment of debentures/gratuity, etc. which is mandated by respective statutes or regulators and are meant for specific/limited transactions only.
- 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.
- Accounts of White Label ATM Operators and their agents for sourcing of currency.
RBI said that the above permissions are subject to the condition that the banks shall ensure that these accounts are used for permitted/specified transactions only. Banks are also asked to flag these accounts in the CBS for easy monitoring it said. 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 current accounts, it added. Banks are instructed to monitor all current accounts and CC/ODs regularly, at least on a half-yearly basis, specifically with respect to the exposure of the banking system to the borrower, to ensure compliance with instructions contained in the circular dated August 6, 2020.
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