Non-compliant present a/cs: RBI extends closure deadline
The Reserve Bank of India (RBI) has allowed banks time till October-end to implement the brand new guidelines on present accounts issued in 2020 following requests from banks and debtors. After the regulator had beforehand set a deadline of July 31, banks lately closed 1000’s of present accounts of debtors to fulfill the deadline.
“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 stated. Such points which banks are unable to resolve themselves shall be escalated to Indian Banks’ Association (IBA) for applicable steerage. “Residual issues, if any, requiring regulatory consideration should be flagged by IBA to the Reserve Bank,” it stated.
In August 2020, the RBI had stated banks with little or no mortgage publicity can’t open a present account for debtors, and present non-compliant accounts needed to be frozen. The central financial institution’s directive was aimed toward cracking down on makes an attempt by debtors utilizing present accounts at non-lending banks to siphon off funds. The RBI had stated banks with lower than 10 per cent of the banking system publicity to a selected borrower can’t open a present account.
Banks had lately knowledgeable present account holders to proceed sustaining the money credit score or overdraft account with the department they’ve taken the mortgage.
The central financial institution on Wednesday stated the restriction applies to debtors in case they avail of money credit score (CC) or overdraft (OD) facility since all operations that may be carried out from a present account can be carried out from a CC or OD account as banks in a CBS setting observe a one-bank-one-customer mannequin as towards a one-branch-one-customer mannequin.
In the case of debtors who haven’t availed of CC/OD facility from any financial institution, there isn’t a restriction on opening of present accounts by any financial institution if publicity of the banking system to such debtors is lower than Rs 5 crore, it stated.
If debtors haven’t availed of CC/OD facility from any financial institution and the publicity of the banking system is Rs 5 crore or extra however lower than Rs 50 crore, there isn’t a restriction on lending banks to such debtors from opening a present account, it stated. Even non-lending banks can open present accounts for such debtors although just for assortment functions, the RBI stated.
“We have received requests from the banks for some more time to resolve the operational issues while implementing the circular in letter and spirit,” the RBI stated. Therefore, so as to be certain that the directions are applied in a non-disruptive method, it has been determined to increase the timeline for implementation, it stated.
Hearing a batch of petitions towards the RBI’s present accounts round dated August 6, 2020, the Kerala High Court lately prolonged until August 12 the established order on present accounts of a clutch of non-banking monetary firms (NBFCs) within the state. According to a Crisil report, the RBI’s insistence on firms opening present accounts with banks is among the many components that has helped massive lenders increase their shares of the aggressive company banking market in 2020.
