In view of concerns emanating from use of multiple operating accounts by borrowers, the Reserve Bank of India (RBI) has decided to put in place certain safeguards for opening of such accounts for borrowers availing credit facilities from multiple banks.
Where a bank’s exposure (sum of sanctioned fund based and non-fund based credit facilities) to a borrower is less than 10 per cent of the exposure of the banking system to that borrower, while credits are freely permitted, debits to the CC/OD account can only be for credit to the CC/OD account of that borrower with a bank that has 10 per cent or more of the exposure of the banking system to that borrower.
The RBI said funds will be remitted from these accounts to the said transferee CC/OD account at the frequency agreed between the bank and the borrower.
Further, the credit balances in such accounts cannot be used as margin for availing any non-fund based credit facilities.
In case there is more than one bank having 10 per cent or more of the exposure of the banking system to that borrower, the bank to which the funds are to be remitted may be decided mutually between the borrower and the banks.
The RBI said banks with exposure to the borrower of less than 10 per cent of the exposure of the banking system can offer working capital demand loan (WCDL) / working capital term loan (WCTL) facility to the borrower.
Where a bank has a share of 10 per cent or more in the total exposure of the banking system to the borrower, it can provide CC/OD facility as hitherto.
In case of customers who have not availed of CC/OD facility from any bank, banks may open current accounts as per RBI guidelines.
In case of borrowers where exposure of the banking system is ₹50 crore or more, banks will be required to put in place an escrow mechanism. Accordingly, current accounts of such borrowers can only be opened/maintained by the escrow managing bank.
However, there is no restriction on opening of ‘collection accounts’ by lending banks subject to the condition that funds will be remitted from these accounts to the said escrow account at the frequency agreed between the bank and the borrower.
Further, the balances in such accounts cannot be used as margin for availing any non-fund based credit facilities.
While there is no prohibition on amount or number of credits in ‘collection accounts’, debits in these accounts will be limited to the purpose of remitting the proceeds to the said escrow account. Non-lending banks cannot open any current account for such borrowers.
In case of borrowers where exposure of the banking system is ₹5 crore or more but less than ₹50 crore, there is no restriction on opening of current accounts by the lending banks. However, non-lending banks may open only collection accounts.
In case of borrowers where exposure of the banking system is less than ₹5 crore, banks may open current accounts subject to obtaining an undertaking from such customers to the effect that they should inform the bank(s), if and when the credit facilities availed by them from the banking system becomes ₹5 crore or more.
Monitor accounts regularly
The RBI asked banks to monitor all current accounts and CC/ODs regularly, at least on a quarterly basis, specifically with respect to the exposure of the banking system to the borrower, to ensure compliance with its instructions.
The central bank underscored that banks should not route drawal from term loans through current accounts. Since term loans are meant for specific purposes, the funds should be remitted directly to the supplier of goods and services.
Expenses incurred by the borrower for day to day operations should be routed through CC/OD account, if the borrower has a CC/OD account, else through a current account.