AgenciesReserve 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.
In a notification on its website, the central bank said it has agreed to extend the timeframe in response to requests from banks for some more time to resolve the operational issues arising from the notification.
"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 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.
"Banks shall 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," RBI said.
In a notification on its website, the central bank said it has agreed to extend the timeframe in response to requests from banks for some more time to resolve the operational issues arising from the notification.
"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 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.
"Banks shall 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," RBI said.
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