RBI Updates : Consolidated Circular on Opening of Current Accounts and CC/OD Accounts by Banks

RBI issued a consolidated circular for opening and operation of current accounts and CC/OD accounts by banks with a view to enforce credit discipline amongst the borrowers as well as to facilitate better monitoring by the lenders.

Banks may compute the aggregate exposure of the prospective customers based on the information collected from the Central Repository of Information on Large Credits (CRILC), Credit Information Companies (CICs), and National E-Governance Services Ltd. (NeSL), etc. by obtaining customers’ declaration if required.

Opening of current account for customers who have not availed any credit facilities from the banking system:

According to the circular, Banks are free to open current accounts of prospective customers who have not availed any credit facilities from the banking system, subject to necessary due diligence as per their Board approved policies. Banks are also free to open current accounts, without any of the restrictions placed in the Circular, for borrowers having credit facilities only from NBFCs/ FIs/ co-operative banks/ non-bank institutions, etc. However, if such borrowers avail of aggregate credit facilities of Rs 5 crore or above from the banks covered under the guidelines and provisions of RBI Circular as mentioned below shall be applicable.

Where the aggregate exposure of the banking system is below Rs 5 crore :

Banks can open current accounts for borrowers, where the aggregate exposure of the banking system is below Rs 5 crore subject to obtaining an undertaking from such customers that they (the borrowers) shall inform the bank(s), if and when the credit facilities availed by them from the banking system becomes Rs 5 crore or more.

Opening of current /collection account:

Non-lending banks are not permitted to open current/ collection accounts. Borrowers can open current accounts with any one of the banks with which it has a CC/OD facility, provided that the bank has at least 10 per cent of the aggregate exposure of the banking system to that borrower. In case none of the lenders has at least 10 per cent of the aggregate exposure, the bank having the highest exposure among CC/OD providing banks may open current accounts without any restriction.

While credits are freely permitted, debits to the CC/OD account can only be for credit to the CC/OD account of that borrower with a bank that has 10 per cent or more of aggregate exposure of the banking