Operations of hundreds of small companies throughout the nation have been disrupted after their present accounts have been closed on Monday, as banks rushed to adjust to the Reserve Financial institution of India’s directive on the opening of such accounts by debtors aimed toward stopping diversion of funds.
As per the RBI’s directive issued in August 2020, no financial institution can open present accounts for patrons who’ve availed of credit score services within the type of money credit score (CC)/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 unaware.
Rajiv Podar, President of IMC Chamber of Commerce & Trade, stated debtors throughout company in addition to non-corporate buildings didn’t obtain any intimation from the banks and have been shocked to search out all the present accounts frozen, main to finish operational disruption.
“For instance, mission accounts are frozen, plant-wise present accounts are frozen, banks have withdrawn present account merchandise with none intimation, which is towards the spirit of banking. How will the businesses pay salaries in August and even all different statutory dues?,” Podar requested.
Moreover sustaining a money credit score/overdraft account with the lead financial institution within the consortium of banks, companies with pan-India operations even have relationships with different banks with both a powerful presence in particular geographical places or providing superior product and repair capabilities or each. However involved concerning the diversion of funds by debtors by way of accounts outdoors the consortium, the RBI had imposed restrictions on the opening of CC/OD accounts by debtors.
Banks at the moment are forcing firms to route all their transactions solely by the financial institution which had prolonged money credit score and overdraft services. Whereas MSMEs are allowed to open as many present accounts as attainable for receiving credit, all debits need to occur solely by the financial institution which has an publicity of over 10 per cent of the borrower.
Chandrakant Salunkhe, President, SME Chamber of India, stated many small items are struggling to satisfy their cost commitments even after having the required cash within the financial institution as their accounts are frozen and try and launch the funds would take 15 days to 1 month.
In the meantime, the RBI, on Monday, took inventory of the compliance standing of banks with its directive. Banks are believed to have largely complied with the RBI’s directive.
To alleviate the struggling of debtors, Podar sought a breather of six months for implementing the rules in a modified method, with correct pointers to banks and shoppers.
“Lead banks needs to be allowed to carry a number of shadow present accounts to satisfy borrower necessities corresponding to wage, contract-specific, location-specific, purpose-specific, and so forth. Every shadow account shall have a novel quantity and a standalone financial institution assertion,” the IMC President stated.