CII asks RBI to relook circular on opening of current accounts

NEW DELHI: Confederation of Indian Industry has appealed to the Reserve Bank of India to make some changes in the new guidelines for opening current accounts by banks issued last month.
The industry body has urged the central bank to raise the thresholds for opening current accounts from Rs. 5 crore to Rs. 25 crore and from Rs. 50 crore to Rs. 100 crore.

The central bank should also decrease the banking exposure limit to 5% from 10% for clients availing cash credit or overdraft (CC/OD) facilities as articulated in the revised guidelines, CII said in a list of recommendations sent to the bank on Sunday.

This will ensure minimal impact on the banking sector without compromising on the central bank’s objective of increasing current account discipline, it said.

“While the guidelines announced by the RBI are of appropriate intent, they are likely to disrupt the ongoing servicing of clients by banks/ NBFCs/ HFCs and is expected to lead to a manifold increase in operational workflows, inefficiencies, delays, inconveniences and costs for delivery of products and services to clients in addition to potential operational risk issues,” CII said.

The RBI had on August 6 issued revised guidelines on “opening of current accounts by banks to ensure discipline in view of concerns emanating from the use of multiple operating accounts by borrowers, both, current accounts (CA) as well as cash credit (CC) / overdraft (OD) accounts”.

No bank can open a current account for clients that have already availed CC/OD facilities from the banking system as per the RBI circular.

For clients that have not availed any CC/OD facilities but have over Rs 50 crore of exposure to the banking system, a current account may be opened along with a mandatory escrow mechanism.

Further, only lending banks can open current accounts for such clients but with an exposure between Rs 5 crore and Rs 50 crore while non-lending banks are only permitted to open collection accounts.