Change in Policy of Opening of Current Accounts by Bank

Now banks can not open current accounts for borrowers who have a cash credit account with any other banks

If borrowers don’t have any cash-credit account with any bank, they fall under 3 categories:

Loans upto 5 crore from banks:

Those under-5crore loans from banks: for these companies banks can open current Accounts.

Loans above 5 crore but upto 50 crore from banks

For Borrowers with 5-50 crore loans from banking system, only lending banks may open current Account., non lending banks may only open collection accpunts i.e. these accounts can receive money which have to be paid into the cash-credit Account.

Loans above 50 crore from banks:

For borrowers over 50 crore loans, one lender bank has to open an escrow account & only this bank can open current Account. Other banks can open collection accounts , but no Non fund based facility can be given on balances in these accounts; non-lending banks can’t open Current Accounts.Small banks will be hit: For cash-credit &overdraft (CC/OD) facility, banks with over 10% exposure can open CC/OD accounts;

New RBI regimen on opening of current accounts & cash-credit accounts. New rules likely to benefit corporate lenders like SBI, BOB, PNB, will take away CA float from banks like HDFC, ICICI, Axis which have good cash Management products, but don’t lend to mid-corporates.

Other lenders can have collection accounts; but have to debit money only to CC/OD accounts of banks that have more than 10% exposure to borrower.

Intent of new current Account & CC/OD rules is to ensure banks who have lent, can monitor cash flows of borrower. But this makes it tough for smaller banks to garner fresh current accounts, as they are unlikely to have 10% exposure to a company.

Click Here to download New Current Account Opening Policy by RBI

Compiled by :

FCA IP Mukesh Mittal

B.Com., FCA

Insolvency Professional

Independent Director

Certified Concurrent Auditor

9215536951, 9813340495

ca.mukeshmittal@gmail.com

https://camukeshmittal.blogspot.com

DISCLAIMER: The Author have taken utmost care while drafting the article but it may occur that certain error creeps in. This article is for academic purpose and should not be treated as a professional advice. The readers are advised to refer the relevant circulars and notifications before making any judgment.