Reserve Bank of India (RBI) has extended the deadline for implementation of its guidelines on current account opening by banks to October 31 from July 31 heeding to requests by banks.

In a notification on its website, the central bank said it has agreed to extend the timeframe in response to requests from banks for some more time to resolve the operational issues arising from the notification.

“Banks will be permitted time till October 31, 2021 to implement the provisions of the circular. This extended time line shall be utilised by banks to engage with their borrowers to arrive at mutually satisfactory resolutions within the ambit of the circular. Such issues which banks are unable to resolve themselves shall be escalated to Indian Banks’ Association (IBA) for appropriate guidance. Residual issues, if any, requiring regulatory consideration shall be flagged appropriate guidance. Residual issues, if any, requiring regulatory consideration shall be flagged by IBA to the Reserve Bank for examination by September 30, 2021,” RBI said.

Bankers said the RBI extension gives them more time to iron out the issues with regards to the notification that has altered dynamics for maintaining current accounts.

“We have mostly complied but there are some accounts particularly linked to the government ane public sector which needed forebearance from RBI. The central bank has approved more than half such requests and some are pending with it. This extension will give us time to ensure we are fully compliant,” said an official from a large public sector bank which has closed more then 1 lakh of accounts to meet with RBI norms over the last one year.

In the notification in August, RBI had said that banks that do not have cash credit or overdraft (CC/OD) facilities cannot open a current account for any borrower. Further, if a bank has an exposure of less than 10% of loans of the banking system to a borrower, all debits to their accounts can only be routed through a bank which 10% or more of the loan exposure.

Banks are free to open CC/OD accounts for companies that have loans to the banking system of Rs 5 crore or less but for exposures between Rs 5 crore and Rs 50 crore, only lending banks can open current accounts and non-lending banks can only open an escrow account. For loans above Rs 50 crore, only the lending banks can open an account and other banks cannot even issue a guarantee for these loans.

“The RBI has been following up on the implementation of this notification over the last one year and we have ensured we are on the right side of the law. There are some tweaks we had to do to keep some accounts and let go some too. Most banks are compliant and this extension gives more time to iron out any flaws,” said a senior official from a large private sector bank.

RBI has not changed the guidelines but reiterated them saying banks have to apply it in letter and spirit.
It has also exempted cash replenishment agencies from the guidelines along with white label ATM companies.
“Banks shall put in place a monitoring mechanism, both at head office and regional/zonal office levels to monitor non-disruptive implementation of the circular and to ensure that customers are not put to undue inconvenience during the implementation process,” RBI said.