Offering succour to small scale business persons, RBI has relaxed rules for opening of current account which have less than ₹5 crore worth of loans and overdraft.
Now, banks are free to offer current account, cash credit and overdraft facilities for these customers, so long as they procure an undertaking from customers that they would inform the banks when the total amount of credit and overdraft exceeds ₹5 crore.
At the same time, the borrowers with an exposure of over ₹5 crore can maintain a current account with any of the banks with which it has an overdraft facility. But the only condition is that these banks must have at least 10 percent of total banking exposure.
In case no bank has 10 percent or more exposure, the bank that has the maximum exposure can open a current account.
The RBI also allowed banks to open inter-bank accounts, accounts with institutions such as NABARD, NHB, EXIM Bank and SIDBI, accounts attached by government and investigative agencies without any restrictions.
What is a current account?
Current account is an account maintained by businesspersons who have a large number of transactions on a daily basis. In a current account, an account holder can withdraw and deposit the money any number of times unlike in a savings account where only a limited number of transactions are permitted.
In August 2020, the central bank had rolled out new rules for opening of current accounts, which implied that a borrower can have a current account with only the bank that has at least 10 percent of total borrowing.
Now, with the new rules in force, the banking regulator also made it clear that other lending banks can only open collection accounts, and the money deposited in these accounts should be remitted in two days of receiving the funds.