Skip to main content

Guidelines on opening of Current accounts and CC / OD accounts by banks

Reserve Bank of India (RBI) has issued consolidated guidelines on Opening of Current Accounts and CC / OD Accounts by Banks.

Which entities are covered by the guidelines?

The guidelines apply to Current accounts and Cash Credit (CC) / Overdraft (OD) accounts opened / maintained with –

  • All Scheduled Commercial Banks
  • All Payments Banks

Opening of Current Accounts for borrowers availing CC / OD facilities from the banking system

Aggregate exposure of banking system to the borrower Opening current account Conditions
Less than ₹5 crore Banks can open current accounts Banks shall obtain an undertaking from the customers that they shall inform the banks, when the credit facilities availed by them from the banking system becomes ₹5 crore or more.
₹5 crore or more Current accounts with any one of the banks with which it has CC / OD facility Current account by bank having least 10% of the aggregate exposure of the banking system to that borrower.
In case none of the lenders have at least 10% of the aggregate exposure, the bank having the highest exposure among CC / OD providing banks may open current accounts.
Other lending banks may open only collection accounts

 
Non-lending banks not permitted to open current / collection accounts

 

Opening of Current Accounts for borrowers not availing CC / OD facilities from the banking system

Aggregate exposure of banking system to the borrower Opening current account Conditions
₹50 crore or more Current accounts can only be opened / maintained by escrow managing bank Borrowers are free to choose any lending bank as their escrow managing bank.
All lending banks should be part of the escrow agreement.
Other lending banks can open ‘collection accounts’

 
Non-lending banks shall not open any current account

 
₹5 crore or more but less than ₹50 crore Lending banks may open current accounts

 
Non-lending banks may open only collection accounts

 
Less than ₹5 crore Banks may open current accounts Banks shall obtain an undertaking from the customers that they shall inform the banks, when the credit facilities availed by them from the banking system becomes ₹5 crore or more.
Prospective customers who have not availed any credit facilities from banking system Banks may open current accounts Subject to necessary due diligence.
Borrowers having credit facilities only from NBFCs / FIs / co-operative banks / non-bank institutions, etc. Banks may open current accounts If such borrowers avail aggregate credit facilities of ₹5 crore or above from the banks covered under these guidelines, the guidelines on opening of Current accounts and CC / OD accounts shall be applicable.

Opening of CC / OD facilities

Aggregate exposure of banking system to the borrower Conditions for Opening CC / OD facility
Less than ₹5 crore Bank can provide such facilities after obtaining an undertaking from the borrowers that they shall inform the banks, when the credit facilities availed by them from the banking system becomes ₹5 crore or more.
₹5 crore or more Banks having a share of 10% or more in the aggregate exposure of the banking system to such borrower can provide CC / OD facility.
In case none of the banks have at least 10% exposure, bank having the highest exposure among CC / OD providing banks can provide such facility.
Banks with exposure to the borrower of less than 10% of the aggregate exposure of the banking system can offer working capital demand loan (WCDL) / working capital term loan (WCTL) facility to the borrower.

What are the exemptions for Specific Accounts?

Banks are permitted to open and operate the following accounts without any of the restrictions stipulated for opening of Current accounts and CC / OD account –

  1. Specific accounts which are stipulated under various statutes and specific instructions of other regulators / regulatory departments / Central and State Governments. 
  2. Accounts opened as per the provisions of Foreign Exchange Management Act, 1999.
  3. 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.
  4. Accounts for settlement of dues related to debit card / ATM card / credit card issuers / acquirers.
  5. Accounts of White Label ATM Operators and their agents for sourcing of currency.
  6. Accounts of Cash-in-Transit (CIT) Companies / Cash Replenishment Agencies (CRAs) for providing cash management services.
  7. Accounts opened by a bank funding a specific project for receiving / monitoring cash flows of that specific project, provided the borrower has not availed any CC / OD facility for that project.
  8. Inter-bank accounts.
  9. Accounts of All India Financial Institutions (AIFIs), viz., EXIM Bank, NABARD, NHB, and SIDBI.
  10. Accounts attached by orders of Central or State governments / regulatory body / Courts / investigating agencies etc. wherein the customer cannot undertake any discretionary debits.

What are other guidelines on opening of Current accounts and CC / OD accounts?

All banks, whether lending banks or otherwise, shall monitor all accounts regularly, at least on a half-yearly basis. If there is a change in exposure of a particular bank or aggregate exposure of the banking system to the borrower which warrants implementation of new banking arrangements, such changes shall be implemented within 3 months from the date of such monitoring.

Updated on November 20, 2023

AD Category-I banks maintaining Special Rupee Vostro Account are permitted to open an additional special current account for its exporter constituent exclusively for settlement of their export transactions.


References

Reserve Bank of India. (2022, April 19). 'Consolidated Circular on Opening of Current Accounts and CC/OD Accounts by Banks'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12293&Mode=0

Reserve Bank of India. (2023, November 17). 'International Trade Settlement in Indian Rupees (INR) – Opening of additional Current Account for exports proceeds'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12568&Mode=0


Follow at - Telegram   Instagram   LinkedIn   Twitter

Labels:

Comments

Post a Comment

Popular Posts

Policies to be formulated by NBFC-BL

Non-Banking Financial Companies (NBFCs) are required to formulate various policies for effective corporate governance and operations. This article lists out some of the important policies to be formulated by the Base Layer NBFCs (NBFC-BL). Business Model Master Direction – Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023 dated October 19, 2023 Para 1.1 of Annex II – In view of the criticality of the nature of the business model in determining the classification of financial assets and restrictions on subsequent reclassification, NBFCs are advised to put in place Board approved policies that clearly articulate and document their business models and portfolios. Para 1.2 of Annex II – NBFCs shall frame their policy for sales out of amortised cost business model portfolios. Expected Credit Losses (ECL) Policy Master Direction – Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023 dated October 19, 202...
Post a Comment
Read more

Special Rupee Vostro Accounts (SRVAs)

Reserve Bank of India (RBI) has consolidated the guidelines governing Special Rupee Vostro Accounts (SRVAs). Who can open and maintain Special Rupee Vostro Accounts (SRVAs)? Authorised Dealer (AD) banks in India may open Special Rupee Vostro Accounts (SRVAs) of its branch outside India or a bank resident outside India. Which transactions can be settled through SRVA? The settlement of cross-border trade transactions through SRVA is an additional arrangement for invoicing, payment and settlement of exports and imports in Indian Rupee (INR).  All permissible capital and current account transactions under Foreign Exchange Management Act (FEMA) may be settled through the SRVA.  AD banks maintaining SRVA are permitted to open additional current account for exporter / importer, exclusively for settlement of export / import transactions. What can be the source and use of funds in SRVA? SRVA may be funded by way of inward remittances or transfer from other repatriable INR accounts in t...
Post a Comment
Read more

Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR)

Reserve Bank of India (RBI) has issued the directions on maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) by banks. To whom are the directions applicable? The directions are applicable to the following Regulated Entities (REs) – Commercial Banks  Small Finance Banks (SFBs) Payments Banks (PBs) Local Area Banks (LABs) Regional Rural Banks (RRBs) Primary (Urban) Co-operative Banks (UCBs) Rural Co-operative Banks – State Co-operative Banks (StCBs) District Central Co-operative Banks (DCCBs) What is CRR? Every bank shall maintain in India by way of cash reserve, a sum equivalent to such percent of its Net Demand and Time Liabilities (NDTL) in India, as the RBI in terms of Section 42(1) of the RBI Act, 1934 (for scheduled banks) and Section 18(1) of the Banking Regulation Act (BR Act), 1949 (for non-scheduled banks) [including provisions of Section 18(1) of the BR Act as applicable to co-operative banks], may specify. What is incremental CRR? In terms of Secti...
Post a Comment
Read more

Unique Transaction Identifier (UTI) for OTC Derivative Transactions

Reserve Bank of India (RBI) has issued directions on Unique Transaction Identifier (UTI) for over-the-counter (OTC) derivative transactions. What are the existing norms for reporting of OTC derivative transactions? At present, all transactions in OTC markets for rupee interest rate derivatives, forward contracts in Government securities, foreign currency derivatives, foreign currency interest rate derivatives, and credit derivatives are reported to the Trade Repository managed by Clearing Corporation of India Limited (CCIL-TR).  What are the directions on Unique Transaction Identifier (UTI) for OTC derivative transactions? Unique Transaction Identifier (UTI), a unique identifier assigned to an OTC derivative transaction, shall be generated / reported for all transactions in OTC derivatives market.  The directions shall be applicable to OTC derivative transactions entered into on or after January 01, 2027. UTI shall be generated in accordance with the UTI Technical Guidanc...
Post a Comment
Read more

Committees to be constituted by NBFC-BL

Non-Banking Financial Companies (NBFCs) are required to constitute various committees for effective corporate governance. This article lists out some of the important committees to be constituted by the Base Layer NBFCs (NBFC-BL). Board of Directors Applicability Companies Act, 2013 Section 149(1) – Every company shall have a Board of Directors. Composition of the Board Companies Act, 2013 Section 149(1) – The Board of Directors shall consist of individuals as directors – Public company – minimum 3 directors Private company – minimum 2 directors One Person Company – minimum 1 director  Maximum 15 directors (more than 15 directors may be appointed after passing a special resolution) Section 149(4) – Every listed public company shall have at least 1/3rd of the total number of directors as independent directors. Companies (Appointment and Qualifications of Directors) Rules, 2014 Rule 3 – The following companies shall appoint at least 1 woman director – Every listed company Every other...
Post a Comment
Read more