What changed
This circular consolidates five earlier circulars issued from August 2020 to October 2021 into a single master document. No new rules were introduced; the annexure and flowcharts now serve as the single reference for all instructions on opening and operating current accounts and CC/OD accounts.
What it means for you
Banks must now refer to this consolidated circular as the sole source for compliance on current and CC/OD account opening rules. For borrowers availing CC/OD with exposure of ₹5 crore or more, only the lender with at least 10% exposure (or the highest exposure CC/OD lender) can open a current account; other lending banks can only open collection accounts with strict fund transfer timelines. For borrowers not availing CC/OD with exposure ₹5 crore to less than ₹50 crore, lending banks face no restrictions on current accounts, but non-lending banks can only open collection accounts. This tightens monitoring and prevents multiple current accounts from diluting credit discipline.
What you must do
- Update internal policies and training materials to reference this consolidated circular as the single source.
- Verify borrower aggregate banking exposure and whether they avail CC/OD before opening any current or CC/OD account.
- Ensure collection accounts for borrowers availing CC/OD with exposure ≥₹5 crore remit funds to the designated CC/OD account within two working days.
- Obtain written undertakings from borrowers with exposure below ₹5 crore to inform the bank if exposure reaches ₹5 crore or more.
Who it affects
All Scheduled Commercial Banks, All Payments Banks, Borrowers availing cash credit or overdraft facilities, Bank branches handling current account and CC/OD account openings
What is the threshold for aggregate exposure that triggers the stricter current account rules?
The threshold is ₹5 crore for borrowers availing CC/OD facilities. If a borrower's total exposure from the banking system is less than ₹5 crore, banks can open current accounts without restrictions, subject to an undertaking. If it is ₹5 crore or more, the borrower can open a current account only with a lender that holds at least 10% of that exposure (or the highest exposure CC/OD lender if none has 10%).
Can a non-lending bank open a current account for a borrower availing CC/OD with exposure of ₹5 crore or more?
No. Non-lending banks are not permitted to open current or collection accounts for such borrowers. Only the lender meeting the 10% exposure threshold (or the highest exposure CC/OD lender) can open a current account; other lending banks can open only collection accounts with strict conditions.
What are the conditions for collection accounts opened by other lending banks for borrowers availing CC/OD?
Funds deposited in collection accounts must be remitted to the borrower's CC/OD account within two working days. The balances cannot be used for repayment of any credit facilities or as collateral/margin. However, the bank can debit fees or charges from the collection account before transferring funds.