Reserve Bank of India (RBI) has extended the deadline for implementation of its guidelines on current account opening by banks to October 31 from July 31 heeding to requests by banks.

“Banks will be permitted time till October 31, 2021 to implement the provisions of the circular. This extended time line shall be utilised by banks to engage with their borrowers to arrive at mutually satisfactory resolutions within the ambit of the circular. Such issues which banks are unable to resolve themselves shall be escalated to Indian Banks’ Association (IBA) for appropriate guidance. Residual issues, if any, requiring regulatory consideration shall be flagged by IBA to the Reserve Bank for examination by September 30, 2021,” RBI said. 

In a notification on its website, the central bank has said that the instructions were issued in order to enforce credit discipline amongst the borrowers as well as to facilitate better monitoring by the lenders, and for this purpose, a graded approach had been prescribed on opening and operating of current accounts and CC/OD facilities. Banks were required to implement these instructions in a non-disruptive manner while keeping the bonafide business requirements of the borrowers in mind.

In a bid to enforce credit discipline and check diversion of funds, RBI had put in place certain safeguards for the opening of current accounts by banks in August last year. Broadly, these rules say banks cannot open current accounts for borrowers where their exposure is less than 10% of the borrower’s total exposure to the banking system.
In the notification in August, RBI had said that banks that do not have cash credit or overdraft (CC/OD) facilities cannot open a current account for any borrower. Further, if a bank has an exposure of less than 10% of loans of the banking system to a borrower, all debits to their accounts can only be routed through a bank which has 10% or more of the loan exposure.

Banks are free to open CC/OD accounts for companies that have loans to the banking system of Rs 5 crore or less but for exposures between Rs 5 crore and Rs 50 crore, only lending banks can open current accounts and non-lending banks can only open an escrow account. For loans above Rs 50 crore, only the lending banks can open an account and other banks cannot even issue a guarantee for these loans..

RBI has not changed the guidelines but reiterated them saying banks have to apply it in letter and spirit.
It has also exempted cash replenishment agencies from the guidelines along with white label ATM companies.