Bank can open specific accounts stipulated under statutes / Regulations without restrictions – RBI FAQs on opening of Current Accounts
RBI by its circulars dated August 6, 2020 and November 2, 2020 on the issue of Opening of Current Accounts by Banks.
On a review, the RBI has 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 circular dated August 6, 2020.
The RBI has also given an indicative list of such accounts as under:
1. Accounts for real estate projects mandated under Section 4 (2) l (D) of the Real Estate (Regulation and Development) Act, 2016 for the purpose of maintaining 70% of advance payments collected from the home buyers.
2. Nodal or escrow accounts of payment aggregators/prepaid payment instrument issuers for specific activities as permitted by Department of Payments and Settlement Systems (DPSS), Reserve Bank of India under Payment and Settlement Systems Act, 2007.
3. Accounts for settlement of dues related to debit card/ATM card/credit card issuers/acquirers.
4. Accounts permitted under FEMA, 1999.
5. Accounts for the purpose of IPO / NFO /FPO/ share buyback /dividend payment / issuance of commercial papers/allotment of debentures/gratuity, etc. which are mandated by respective statutes or regulators and are meant for specific/limited transactions only.
6. Accounts for payment of taxes, duties, statutory dues, etc. opened with banks authorized to collect the same, for borrowers of such banks which are not authorized to collect such taxes, duties, statutory dues, etc.
7. Accounts of White Label ATM Operators and their agents for sourcing of currency.
It has been clarified that the above exceptions are subject to the condition that the banks shall ensure that these accounts are used for permitted/specified transactions only. Further, banks shall flag these accounts in the CBS 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.
It has also been mandated that the Banks shall monitor all current accounts and 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 circular dated August 6, 2020 .
RBI has also issued a set of frequently asked questions (FAQs) providing clarifications as under:
The previous guidelines which required banks to obtain NOC before opening current accounts have been replaced by the revised guidelines issued vide circular dated August 6, 2020. The requirement of obtaining NOC is no more applicable.
Banks may compute the aggregate exposure for the purpose of these guidelines based on the information available from Central Repository of Information on Large Credits (CRILC), Credit Information Companies (CICs), National E-Governance Services Ltd. (NeSL), etc. and by obtaining customers’ declaration, if required.
The instructions are applicable to Scheduled Commercial Banks and Payments Banks. Accordingly, the aggregate exposure for the purpose shall include exposures of these banks only.
All fund based and non-fund based credit facilities sanctioned by the banks and carried in their Indian books shall be included for the purpose of aggregate exposure.
The revised guidelines are applicable to all borrowers.
Banks are not permitted to open current accounts for borrowers who have availed any fund or non-fund-based credit in the form of overdraft facilities.
In case of proprietary firms, the aggregate exposure shall include all the credit facilities availed by him/her, for business purpose or otherwise.
In such cases, funds may be remitted to the account maintained with the bank having the highest share in the exposure of the banking system to the borrower. Credits and debits will be freely permitted in the said account.
Alternatively, the borrower is free to avail working capital only in the form of WCDL/WCTL and open current accounts as per the provisions of paragraph 1 (v) of the circular based on the aggregate exposure.
In such cases, banks are permitted to debit interest/charges pertaining to the said CC/OD (not any other facilities granted by the same bank) account as well as fee/charges for opening of LC/ BG, issue of DDs, etc. before transferring the funds to the CC/OD account of the borrower with bank(s) having 10% or more of the aggregate exposure of the banking system to that borrower.
Banks are free to enhance existing CC/OD/WCTL/WCDL facilities or sanction new facilities in these forms subject to provisions of the circular on ‘Guidelines on Loan System for Delivery of Bank Credit’ dated December 5, 2018 as well as the circular dated August 6, 2020 on opening of current accounts.
Banks may open a current account for receiving/monitoring cash flows of a specific project, provided the borrower has not availed any CC/OD facility for that specific project. Banks opening project specific current/escrow account shall ensure that cash flows coming in the account are from that project only.
Banks are free to open current accounts for borrowers having credit facilities only from NBFCs/FIs/ /co-operative banks/non-bank institutions. However, if such borrowers avail facilities from the banks covered under the guidelines, all the provisions of the circular shall be applicable.
For borrowers with multiple projects/ multiple business units, banks may open multiple escrow accounts for monitoring of project-wise / unit-wise cash flows. Banks opening project specific current/escrow account shall ensure that cash flows coming in the account are from that project/unit only.
All lending banks should be part of the escrow agreement. The terms and conditions may be decided mutually by lending banks and the borrower. Borrowers shall be free to choose their escrow managing banks. Non-lender banks are not permitted to escrow accounts
In cases where term loans are meant for purposes other than for supply of goods and services and where the payment destination is unidentifiable, banks may route such term loans through CC/OD or current accounts of the borrower opened as per the provisions of the circular. Banks shall ensure that where the payment destination is identifiable (i.e. refinance of existing debt, etc.), payment is made directly, without routing it through CC/OD accounts.
All banks, whether lending banks or other account holding banks, are required to monitor the accounts on regular basis as prescribed in the circular.
Borrowers shall be free to choose the bank(s) for the purpose of maintaining their operating current account/escrow account/CC/OD accounts within the overall framework of the circular. Further, banks will have to implement the new arrangements within a period of three months from the date of change in exposure.
Collections accounts can be debited only for transferring the funds to the escrow account of the borrower.
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