The Reserve Bank of India (RBI) on August 6, 2020 has revised the instructions for the opening of current accounts. The instructions for this purpose were earlier issued on July 02, 2015 vide Circular no. DBR.Leg.BC.25./09.07.005/2015-16. The instructions have been further reviewed and revised.
Following are the revised instructions:
• Banks should not open accounts for all the customers who have availed the credit facilities in the form of cash credit (CC) or overdraft (OD).
• In case the bank’s exposure to the borrower is less than 10 percent of the exposure of the borrowing system, the credit to the account of the borrower can only happen, if the bank has 10 percent or more exposure to the banking system to that borrower.
• Where a bank has a share of 10 per cent or more in the total exposure of the banking system to the borrower, it can provide CC/OD facility as hitherto.
• Customers who have not taken the facility of CC/OD from any banks, can open their current accounts according to these guidelines:
1. Banks must put an escrow mechanism in cases where the exposure of the banking system is more than 50 crores. Only the escrow managing banks can open the current accounts of such borrowers.
2. Borrowers who have banking system of more than 5 crores, but less than 50 crores can open the current accounts without any restrictions.
3. Where the banking exposure is less than 5 crores, the banks can open current accounts, but they must obtain an undertaking from the consumers.
4. Banks are free to open the current accounts of the consumers, but they have to go through proper due diligence according to the guidelines framed by the Board.
• Banks should monitor all such activities regularly on a quarterly basis, to ensure the compliance.
[Circular No. DOR.No. BP.BC/7/21.04.048/2020-21]