The Reserve Bank of India (RBI) has allowed time to banks till October 31 to implement changes in terms of managing current accounts, following reports of small businesses being hit with account freezing in the last few days.
The central bank cited the circulars it issued in August, November and December last year to say that these are aimed at enforcing credit discipline among the borrowers and also to facilitate better monitoring by the lenders. The RBI, however, made it clear that a graded approach has been prescribed to banks on opening and operating of current accounts and cash credit/overdraft 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,” the RBI said in a statement.
The RBI on Wednesday said that it has received requests from the banks for some more time to resolve the operational issues while implementing the circular in letter and spirit for which it is now extending the date of implementation.
“Banks will be permitted time till October 31, 2021 to implement the provisions of the circular. 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,” the RBI added.
The central bank further said that if a bank is unable to resolve any issue, it can be escalated to the Indian Banks Association (IBA) for guidance and residual issues can be taken up with the RBI by the industry lobby grouping for being redressed.
The accounts of White Label ATM operators and their agents are exempted from the provisions of the Current Account circular dated August 6, 2020, it said, adding that as cash-in-transit (CIT) companies or cash replenishment agencies (CRAs) essentially carry out a similar activity, the exemption would be applicable to these entities as well.
The RBI also asked banks to put in place a monitoring mechanism, both at head office and regional/zonal office levels to monitor non-disruptive implementation of the circular and to ensure that customers are not put to undue inconvenience during the implementation process.
The central bank noted that banks are not permitted to open current accounts for borrowers who have availed agricultural/personal OD or OD against deposits.
It further stated that in the case of borrowers who have not availed CC/OD facility from any bank, there is no restriction on opening of current accounts by any bank if exposure of the banking system to such borrowers is less than ₹5 crore. For those in this category who have a banking system exposure of up to ₹50 crore, lenders can create current accounts.
The RBI said that 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 as banks in a CBS environment follow a one-bank-one-customer model as against a one-branch-one-customer model.