RBI exempts certain accounts from its current account norm

Here’s all you need to know about the changes made by RBI

The Reserve Bank of India (RBI) on Monday allowed certain accounts to be excluded from the ambit of its circular that was issued on August 6 in which the regulator specified certain rules for the opening of current accounts by banks. “On a review, it has been decided to permit banks to open specific accounts which are stipulated under various statutes and instructions of other regulators/ regulatory departments, without any restrictions placed in terms of the above-mentioned circular dated 6 August 2020,” RBI said on Monday.

RBI on Monday made changes to its circular that was issued on August 6 with respect to the opening of current accounts by banks, (Reuters)

Here’s all you need to know about the changes made by RBI:

1. In the August circular, the central bank said that borrowers with more than Rs 50 crore exposure to the banking system need to have an escrow mechanism. Only banks managing such escrow accounts could open current accounts. Companies with less than Rs 50 crore exposure will have fewer restrictions in opening such accounts.

2. Some of the excluded cases comprise accounts for real estate projects mandated under Section 4 (2) l (D) of the Real Estate (Regulation and Development) Act, 2016, for the purpose of maintaining 70% of advance payments collected from the home buyers; nodal or escrow accounts of payment aggregators or prepaid payment instrument issuers for specific activities as permitted by RBI under Payment and Settlement Systems Act, 2007; accounts for settlement of dues related to a debit card, ATM card, credit card issuers or acquirers, among others.

3. These exclusions are subject to the condition that the banks ensure these accounts are used for specified transactions only. Other than this, banks have to flag these accounts in the core banking solution (CBS) for easy monitoring.

4. According to the central bank, banks may compute the aggregate exposure for the purpose of these guidelines based on the information available from a central repository of information on large credits (CRILC), credit information companies (CICs), National e-governance Services Ltd (NeSL) and by obtaining customers’ declaration, if required. RBI also clarified that since the instructions are applicable to scheduled commercial banks and payments banks, the aggregate exposure under the circular will include exposures of these banks only and not those from non-bank lenders.

5. All fund based and non-fund based credit facilities sanctioned by the banks and carried in their Indian books shall be included in aggregate exposure, according to RBI.