RBI has issued Amendment Directions on December 11, 2025 that overhaul the framework for opening and maintaining cash credit (CC), current accounts (CA) and overdraft (OD) accounts, notably freeing CC facilities from earlier operational restrictions and rationalising current/OD discipline around a ₹10 crore banking-system exposure threshold with a 10% lender-share rule. These amendments will apply across commercial banks and cooperative banks as part of the finalised “Transaction Accounts” framework, and are to be implemented from April 1, 2026 (with the option to adopt earlier).
Background and policy intent
RBI’s August 2020 circular on “Opening of Current Accounts by Banks – Need for Discipline” had introduced tight controls on multiple current accounts and routing of transactions, anchored to system exposure thresholds of ₹5 crore and ₹50 crore and a strong preference for routing all flows through CC/OD where such limits existed. Based on subsequent experience and stakeholder feedback, RBI issued seven draft “Transaction Accounts Directions” on October 1, 2025 to rationalise these rules and reduce friction while preserving credit discipline and visibility over borrower cash flows.
The December 11, 2025 Amendment Directions are the final outcome of this exercise and are reflected through category-specific Credit Risk Management / Miscellaneous Amendment Directions for commercial banks, SFBs, local area banks, RRBs and urban/rural co-operative banks.
Key change 1: Cash credit fully de-linked
A core change is that CC accounts are now expressly recognised as operationally distinct from current and OD accounts and are removed from the transaction-account restriction framework.
- The Directions clarify that a CC facility is primarily a working capital product linked to the borrower’s current assets and may be sanctioned and operated “as per the needs of the customer, without any restriction under this Chapter.”
- This addresses industry concerns that grouping CC with current/OD for restriction purposes could constrict working capital flows and complicate consortium / multiple-banking structures.
For banks, this means that conditions such as exposure thresholds, “collection account only” treatment, or lender-share criteria now apply only to current and OD accounts and not to CC limits, though usual credit risk management standards continue to govern sanction and monitoring of CC.
Key change 2: New ₹10 crore exposure threshold for CA/OD
For current and OD accounts, the framework now pivots to a uniform ₹10 crore “aggregate exposure of the banking system” threshold, replacing the earlier ₹5 crore / ₹50 crore bands under the 2020 circular.
- Where aggregate banking system exposure to a customer is less than ₹10 crore, any bank may open and maintain a current or OD account “without any restriction” under this Chapter, subject to its own internal policies and usual KYC/AML norms.
- Once the exposure reaches ₹10 crore or more, the stricter eligibility and collection-account regime applies, with a view to preventing fungibility and diversion of substantial working capital flows across multiple unrestricted operative accounts.
“Banking system” for this purpose explicitly covers commercial banks (including SFBs, local area banks and RRBs, but excluding payments banks) as well as urban and rural co-operative banks, and “exposure” includes both sanctioned fund-based and non-fund-based facilities.
Key change 3: 10% share rule and multi-bank flexibility
For borrowers with banking-system exposure of ₹10 crore or more, any bank can maintain a current or OD account only if it has:
- at least 10% share in the system’s aggregate exposure; or
- at least 10% share in the system’s aggregate fund-based exposure.
Where the above criteria are not met system-wide, the Directions provide graded flexibility:
- If no bank or only one bank meets the 10% condition, two banks with the largest exposures may maintain current/OD accounts.
- If only one bank has any exposure, one more bank of the customer’s choice may also maintain a current account, subject to a No Objection Certificate (NOC) from the lending bank.
- Where no scheduled commercial bank qualifies but the borrower wants a current account with an SCB, any one SCB of the borrower’s choice may maintain it, again against NOCs from all lending banks in the system.
This responds to feedback that the earlier cap of two banks and tighter eligibility conditions were too rigid; RBI has now allowed any lending bank with more than 10% exposure to operate a current/OD account, which can result in more than two operative banks where the exposure distribution permits.
Key change 4: Treatment of collection accounts
Banks that do not meet the eligibility criteria to maintain a current/OD account for a ≥₹10 crore exposure borrower may maintain only “collection accounts”.
- A collection account is defined as a current or OD account primarily used for receipts, with restricted debits subject to conditions in the Directions (e.g., transfer to a designated account, statutory dues, bank’s own charges).
- Funds credited to a collection account must be transferred within two working days to a designated CC, current or OD account, and any OD sanctioned in a collection account must be disbursed only via the designated account.
This structure preserves the ability of multiple banks to receive flows (for convenience or local banking reasons) while ensuring that utilisations consolidate through designated operative accounts for monitoring.
Key change 5: Explicit exemptions and product-linked current accounts
The Amendment Directions carve out specific exemptions from the ≥₹10 crore restrictions:
- Accounts mandated under FEMA and related notifications, including certain special-purpose accounts.
- Statutorily mandated or regulator/Government-directed accounts or transactions.
- Accounts of entities regulated by financial sector regulators (RBI, SEBI, IRDAI, PFRDA) used for their regulated activities.
In addition, banks that offer products or services that inherently require routing transactions through a current account with themselves (for instance, certain escrow or platform-linked arrangements) may maintain such current accounts even if they are otherwise ineligible, subject to:
- a Board-approved policy justifying the need;
- strict limitation of transactions to the specified purpose (no cheque books, cards or cash transactions); and
- safeguards to ensure these are not used as substitute general current accounts or to circumvent restrictions.
Surplus funds in exempt or product-linked accounts must still be swept to a designated operative account to avoid idle balances and opacity.
Monitoring, controls and go-live timeline
The Directions mandate half-yearly (at least) monitoring of all accounts for compliance with eligibility, exposure thresholds and NOC conditions.
- If a bank becomes ineligible (due to changes in system exposure or its own share), it must notify the customer within one month and convert the account into a collection account or close it within three months of observing ineligibility.
- Banks must flag accounts opened under these Directions in their core banking systems, monitor transactions at both account and borrower level, and ensure accounts are not used as pass-through channels or de-facto payment-service or deposit-taking platforms by unlicensed entities.
The amended framework is to come into force from April 1, 2026, though banks are permitted to adopt it earlier in full if they choose. This lead time is intended to facilitate system changes, borrower communication, and restructuring of existing current/OD arrangements that are inconsistent with the new rules.
Practical implications for banks and borrowers
For banks, the amendments:
- Restore full flexibility in designing and operating CC-based working capital facilities while preserving CA/OD discipline for larger borrowers.
- Require tighter inter-bank coordination on exposure data, NOCs, and designation of primary operative accounts for ≥₹10 crore borrowers.
For borrowers:
- Sub-₹10 crore exposure customers gain simpler access to multiple current/OD accounts, subject only to general bank policies.
- Large borrowers with dispersed banking still face constraints on the number and type of CA/OD accounts, but now with more nuanced flexibility via the 10% share rule and the option for additional banks in specific exposure patterns.
Overall, the December 11, 2025 Amendment Directions seek to balance ease of doing business with the banking system’s need for robust credit discipline and clearer visibility into borrower cash flows, especially in higher-exposure segments
