The Reserve Bank of India (RBI) has come up with some strict guidelines when it comes to opening and operating current accounts by corporate borrowers in the country. RBI has proposed these new guidelines to discourage corporates from engaging in fund diversion. These changes will also be applicable to existing accounts and borrowers will be given adequate time to implement these changes.
As per the new changes, corporates can now open current accounts only in the lead bank in a lending consortium. They can have collection accounts in other banks in the consortium, but the funds must be transferred to the lead bank’s current account by the end of the day. These new rules are applicable to corporates that have used at least Rs.50 crore in credit from the banking system.
In certain cases, corporates have borrowing accounts with one bank and collection accounts in other banks to prevent the lender from holding funds from their accounts for outstanding payments. RBI has come up with these new guidelines to prevent this practice by corporate borrowers. RBI has noted that there is no restriction on the number of collection accounts opened by corporates. However, the proceeds must be remitted to the current account opened with the lead bank.
While this regulation is likely to minimise stressed accounts, many lenders have a concern that this might bring down the overall number of CASA (current and savings accounts) significantly. Moreover, this move could also have an impact on SMEs that typically face a long delay in receiving payments.
Once these new guidelines come into effect, corporate borrowers cannot use their existing current accounts in case the holding bank is not a consortium leader. Here, they may have to either close these accounts or convert them into collection accounts. This is likely to come into effect within three months after RBI issues its final circular.
Source: Economic Times