RBI exempts 7 categories of accounts from ambit of current accounts circular

The Reserve Bank of India (RBI) on Monday issued a series of frequently asked questions (FAQs) to clarify on its August 6 circular regarding opening of current accounts. It also exempted seven categories of current accounts from the definition of ‘aggregate exposure’ within the ambit of the circular.

“On a review, it has been decided to permit banks to open specific accounts which are stipulated under various statutes and instructions of other regulators/ regulatory departments, without any restrictions placed in terms of the above-mentioned circular dated August 6, 2020,” the central bank said in a notification.

Accounts for real estate projects, mandated under the Real Estate (Regulation and Development) Act, 2016, to maintain 70% of advance payments collected from homebuyers, will not be included as aggregate exposure to a borrower within the purview of the circular. Nodal or escrow accounts of payment aggregators or prepaid payment instrument issuers for specific activities as also accounts for settlement of dues related to debit card, ATM card and credit card issuers and acquirers will not be included.

The exempted categories also include accounts permitted under FEMA, 1999, and accounts for the purpose of public offers, new fund offers (NFOs), share buybacks, dividend payments, issuance of commercial papers and allotment of debentures or gratuity, mandated by respective statutes or regulators and are meant for specific or limited transactions only. Accounts for payment of taxes, duties and statutory dues opened with banks authorised to collect the same, for borrowers of such banks not authorised to collect such taxes or dues will also not count towards the exposure limit. In addition, accounts of White Label ATM Operators and their agents for sourcing of currency have been exempted.

The RBI said this permission was subject to the condition that the banks should ensure that these accounts were used for permitted or specified transactions only. “Further, banks shall flag these accounts in the CBS (core banking system) for easy monitoring. Lenders to such borrowers may also enter into agreements/arrangements with the borrowers for monitoring of cash flows/periodic transfer of funds (if permissible) in these current accounts,” the notification said.

Banks will be required to monitor all current accounts and cash credit/ overdraft accounts (CC/ODs) regularly, at least on a half-yearly basis, specifically with respect to the exposure of the banking system to the borrower, to ensure compliance with instructions contained in the circular dated August 6.

They will not be required to obtain no-objection certificates (NOCs) before opening current accounts.
Responding to banks’ queries on how they must determine the aggregate exposure of the banking system to a borrower, the RBI said they might compute the aggregate exposure for the purpose of these guidelines based on the information available with Central Repository of Information on Large Credits (CRILC), credit information companies (CICs), National E-Governance Services (NeSL), and by obtaining customers’ declaration, if required.

The central bank also clarified that all fund-based and non-fund based credit facilities sanctioned by banks and carried in their Indian books – including daylight overdraft (DLOD)/ intra-day facilities, irrevocable payment commitments, limits set up for transacting in forex and interest rate derivatives as also commercial papers (CPs) – shall be included for the purpose of aggregate exposure.

The August 6 circular mandated that banks which account for less than 10% of the aggregate banking exposure to a large borrower must open only collection accounts for that borrower. It also stated that no bank shall open current accounts for customers who have availed credit facilities in the form of CC)/OD from the banking system and all transactions shall be routed through the CC/OD account.

The circular was aimed at enforcing better repayment discipline among large borrowers and preventing the siphoning of funds. Thereafter, banks had sought clarifications about what constitutes the definition of ‘aggregate exposure’, among other things.