The Reserve Bank of India (RBI) has exempted some services from the restrictions on opening/ running current accounts without much lending exposure. In a notification, the Reserve Bank of India mentioned seven specific services which have been exempted from its Circular in August 2020.
In August, the Reserve Bank India had set new conditions for banks to open current accounts for large borrowers in order to strengthen credit discipline. Use of multiple operating accounts by borrowers both current as well as cash-credit (CC) or overdraft (OD) accounts, has been observed to be prone to vitiating credit discipline. Among the key restrictions introduced, the RBI had said that for credit facilities between Rs. 5-50 crore, any lender to the account can open a current account, while non-lending banks can only open a “Collection Account”. For credit facilities above Rs 50 crore, banks were mandated to create an “Escrow Mechanism” and only the escrow-managing lender or agent can open the current account for the borrower.
The Central Bank has laid down a list of categories that will be exempted from the new current account rules. These categories include: (1) Accounts for real estate projects for the purpose of maintaining 70% of advance payments collected from the home buyers (2) Nodal or escrow accounts of payment aggregators/ prepaid payment instrument (3) Accounts for settlement of dues related to debit card/ ATM card/ credit card issuers/ acquirers (4) Accounts for the purpose of IPO / NFO / FPO/ share buyback/ dividend payment/ issuance of commercial papers/ allotment of debentures/ gratuity (5) Accounts for payment of taxes, duties, statutory dues, etc. opened with banks authorised to collect the same, for borrowers of such banks which are not authorised to collect such taxes, duties, statutory dues, etc. (6) Accounts of white label ATM operators and their agents for sourcing of currency. (7) Accounts permitted under FEMA 1999 which covers cross border investments, foreign exchange transactions and transactions between residents and non-residents.
The above exemptions are subject to the condition that banks shall ensure these accounts are used for permitted/ specified transactions only. Besides, banks shall flag these accounts in the core banking system (CBS) for easy monitoring. Lenders to such borrowers may also enter into an agreement/ arrangement with the borrowers for monitoring of cash flows/ periodic transfer of funds in these current accounts.