What changed
RBI has relaxed restrictions for borrowers with banking exposure below ₹5 crore, allowing them to open current accounts without limits. For exposures of ₹5 crore or more, borrowers can now maintain current accounts only with a bank that has at least 10% of total banking exposure; otherwise, the bank with the highest exposure qualifies. Non-lending banks are barred from opening current accounts, and collection accounts must remit funds within two working days.
What it means for you
Banks must reassess their current account relationships with borrowers, especially those with large credit exposures. Lenders with less than 10% exposure may lose current account business to the lead bank, impacting fee income and transaction visibility. Compliance monitoring becomes critical, with half-yearly reviews and a three-month window to adjust arrangements if exposure changes.
What you must do
- Review all borrower current accounts against the new exposure thresholds and ensure compliance within one month.
- For borrowers with exposure ≥₹5 crore, identify the bank with at least 10% share and restrict current accounts accordingly.
- Set up half-yearly monitoring of banking system exposure and your bank's share to trigger timely reallocation.
- Update collection account processes to remit funds within two working days to the designated CC/OD account.
- Communicate changes to borrowers and ensure undertakings from those under ₹5 crore to report when exposure hits ₹5 crore.
Who it affects
All Scheduled Commercial Banks, All Payments Banks, Borrowers with cash credit or overdraft facilities, Lending and non-lending banks in consortium arrangements
What happens if a borrower's exposure crosses ₹5 crore after opening a current account?
The borrower must inform the bank, and the bank must then apply the new rules: the borrower can only maintain a current account with one bank that holds at least 10% of total banking exposure, or the bank with the highest exposure.
Can non-lending banks open current accounts for borrowers?
No, non-lending banks are not permitted to open current accounts for borrowers. They can only open collection accounts, which must transfer funds to the designated CC/OD account within two working days.
How often must banks monitor compliance with these rules?
Banks must monitor all accounts at least on a half-yearly basis to check exposure levels and their share, and implement any required changes within three months of monitoring.