As per an RBI Notification dated 06th August 2020, it has provided Guidelines on Opening of Current Accounts by Banks. As RBI has observed that various borrowers have diverted and siphoned the borrower fund by opening a number of a current accounts with different banks. To stop these malpractices, RBI has issued new guidelines for opening/operating a Current Account.

The following points should be stated in it:

• No Current Account, where Customer Availing Credit Facilities (CC/OD) from banking System
• In Case, customer not availed CC/OD facility from any Bank, Bank may open Current Account as under (Exposure from Banking System):

A. Exposure of Rs.50 Crore or More:

• Mandatory Escrow Mechanism required
• Only Escrow managing bank/agent will open the Current account
• Other lenders can open Collection Accounts
• Balances in such accounts shall not be used as margin for availing any non-fund based credit facilities.
• Non-Lending banks shall not open current accounts.

B. Exposure More than Rs.5 Crore but less then Rs.50 Crore:

• Lending Bank: Can open Current Account
• Non-Lending Bank: Can open ONLY Collection Accounts.

C. Exposure Less than Rs.5 Crore:

• Any Bank can open the Current Account Subject to an undertaking (Undertaking that Customer shall inform bank(s) in case the exposure exceeds Rs.5 Crore)

For more details, please refer to the attached document:-  RBI Notification on Opening of Current Accounts by Banks – Need for Discipline

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The information contained herein is in summary form based on Notification Issued by Reserve Bank of India as per link attached above. While the information is believed to be accurate to the best of our knowledge, we do not make any representations or warranties, express or implied, as to the accuracy or completeness of this information. Readers should conduct and rely upon their own examination and analysis and are advised to seek their own professional advice. This note is not an offer, invitation, advice or solicitation of any kind. We accept no responsibility for any errors it may contain, whether caused by negligence or otherwise or for any loss, howsoever caused or sustained, by the person who relies upon it.