RBI puts off current account norms to Oct 31

Tribune News Service

New Delhi, August 4

With operations of thousands of businesses choked after their current accounts were closed on Monday, the Reserve Bank of India has put off the implementation of a circular to banks for ensuring discipline among borrowers by three months to October 31.

“This extended timeline 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 flagged to the Indian Banks’ Association (IBA) by September 30,” said a RBI statement.

Thousands of businesses could not pay salaries and other statutory dues after they apparently did not receive any intimation from banks but found their current accounts frozen on Monday, the first working day of the month.

The RBI had imposed certain restrictions on the opening of current accounts to check the diversion of funds.

The RBI, however, clarified that in case of small borrowers (less than Rs 5 crore) who have not availed of overdraft facility from any bank, there is no restriction on opening of current accounts. In case of small borrowers (between Rs 5 crore and Rs 50 crore), there is no restriction on opening a current account in lending banks. Even non-lending banks can open current accounts for such borrowers though only for collection purposes, it clarified.

The RBI has also asked banks to monitor all current accounts regularly, specifically with respect to the exposure of the banking system to the borrower, to ensure compliance.

A major feature of the new guidelines is that banks are not permitted to route withdrawals from term loans through current accounts. Since term loans are meant for specific purposes, the funds should be remitted directly to the supplier of goods and services.