RBI Extends Deadline For Complying With Current Account Rules Till October 31, 2021

Acceding to requests from lending institutions to grant them more time to comply with its last year's circular on current account and overdraft (OD) facilities for large companies, the Reserve Bank of India (RBI) on Wednesday extended the deadline till October 31, 2021, by which they would have to resolve the matter.

Reiterating its stand on the matter, the RBI again issued the circular related to current accounts and OD facilities and in a stern message to all lending institutions, said that it will not change the rules and was only extending the deadline, which had ended on July 31, 2021.

In a circular issued by the central bank in August 2020, it had said that a customer can open a current account with any bank if he or she has not availed overdraft facility from any bank, and the exposure to the banking system is less than Rs 5 crore.

If the exposure is between Rs 5 crore and Rs 50 crore, the lending bank can allow the customer to open a current account as well, the circular had noted.

At the same time, the circular had emphasised that for large borrowers with Rs 50 crore exposure and above and having several bank exposures, current account and cash credit (CC) and OD facility has to be with a single bank.

In a nutshell, a customer should have a single current account and only with that bank with which it has a running loan facility, the circular had emphasised. If there are cases where a customer has multiple banks, then the borrower and the banks can decide mutually where to keep the current account, the RBI had said.

The main aim behind RBI's move was to stop the practice where companies normally take loans from state-owned banks but ran current accounts with either private or foreign banks, which offer better facilities.

The central bank had said that the core banking system connects all banks and companies should not have issues in integrating their accounts.

Following the issuance of the circular, thousands of current accounts were shut down by banks by July 31, 2021, the deadline fixed by the RBI for completing the process. However as this turned out to be a long winding process, banks sought more time, which has now been extended by RBI till October 31, 2021.