RBI issues guidelines to implement its circular on opening of current accounts

Banks are not allowed to open current accounts for borrowers who have availed agricultural/ personal overdraft (OD) or OD against deposits. 

Created On: Aug 5, 2021 13:04 IST

The Reserve Bank of India issued guidelines for the implementation of the circular on the opening of current accounts by banks on August 4, 2021. 

The apex bank has given all the banks time until October end to implement the new rules on current accounts issued in 2020. RBI had previously set the deadline of July 31, 2021. 

The RBI had issued three circulars in 2020 on the opening of current accounts by banks and CC/OD facilities. The circulars comprised instructions to enforce credit discipline among the borrowers. 

They were also aimed at facilitating better monitoring by leaders and for this, RBI had suggested a graded approach on opening and operating of current accounts. 

The banks were required to implement the following instructions : 

1. For borrowers who have not availed CC/ OD facility from any bank, there would be no restriction on the opening of current accounts in any bank if the exposure of the banking system to such borrowers is less than Rs 5 crore. 

2. For borrowers who have not availed CC/ OD facility from any bank and the exposure of the banking system is Rs 5 crore or more but less than Rs 50 crore then also there is no restriction on banks to let such borrowers from opening a current account.

3. The restriction applies to borrowers in case they avail of CC/OD facility since all operations that can be carried out from a current account can also be carried out from a CC/ OD account. 

4. Banks are not allowed to open current accounts for borrowers who have availed agricultural/ personal overdraft (OD) or OD against deposits. 

Banks generally follow the one-bank-one customer model as against the one-branch-one-customer model. 

Why has the deadline for implementing the RBI instructions been extended?

The Reserve Bank had received requests from banks to resolve operational issues while implementing the RBI circulars. To ensure that the instructions are implemented in a non-disruptive manner, the RBI decided that:

a) The banks will be allowed to implement the provisions of the circulars till October 31, 2021. 

The extended time can be used by the banks in engaging with the borrowers to arrive at mutually satisfactory resolutions. The issues that the banks were unable to resolve themselves will be escalated to the Indian Banks' Association (IBA) for appropriate guidance. If there are any remaining issues, they will be flagged by the IBA to the RBI for examination by September 30. 

b) The banks will be required to put in place a monitoring mechanism at the head office and regional and zone-level offices to monitor non-disruptive implementation of the circular and to ensure customers are not put under undue inconvenience during the implementation process. 

c) Banks shall ensure that the contents of the circular are implemented in spirit without causing inconvenience to the borrowers. 

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