RBI gives banks 3 more months to comply with new rules on opening current accounts

The Reserve Financial institution of India has given banks three extra months, until October 31, to implement the brand new guidelines on opening present accounts. This comes after hundreds of small companies throughout the nation raised a cry after their present accounts have been frozen on Monday, as banks rushed to adjust to the RBI directive.

In August 2020 an RBI directive had mentioned that banks can’t open present accounts for purchasers who’ve availed themselves of money credit score (CC) or overdraft (OD) from the banking system. Whereas the central financial institution had given banks time till end-July to implement the brand new guidelines, many account holders have been caught unawares.

Accounts frozen

Operations of many small companies have been disrupted as they discovered their challenge accounts and plant-wise present accounts frozen and so they couldn’t pay salaries and statutory dues in August.

On Wednesday, the RBI mentioned banks ought to use the prolonged timeline to interact with their debtors to reach at a passable resolution throughout the ambit of the round.

On points that banks are unable to resolve by themselves, the RBI requested them to escalate it to the Indian Banks’ Affiliation (IBA) for steering. Residual points requiring regulatory consideration must be flagged by the IBA to the RBI for examination by September 30, 2021.

Monitoring mechanism

The central financial institution requested banks to place in place a monitoring mechanism, each at head workplace and regional/zonal workplace ranges to watch non-disruptive implementation of the round and to make sure that prospects usually are not inconvenienced.

In addition to sustaining money credit score/overdraft account with the lead financial institution within the consortium, companies with pan-India operations additionally used to have relationships with different banks with both a powerful presence in a selected geographical space or providing superior product/providers.

However issues over diversion of funds by debtors by way of accounts outdoors the consortium prompted the RBI to clampdown on opening of CC/OD accounts. This was aimed toward imposing credit score self-discipline amongst the debtors in addition to facilitating higher monitoring by the lenders

The RBI, on Wednesday, reiterated that debtors who haven’t taken CC/OD facility from any financial institution face no restriction within the opening of present accounts by any financial institution if the publicity of the banking system to such debtors is lower than ₹5 crore.

The restriction, in response to the RBI, is as a result of all operations that may be carried out from a present account may also be carried out by way of a CC/OD account as banks in a CBS surroundings observe a one-bank-one-customer mannequin as towards a one-branch-one-customer mannequin.

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