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The Reserve Bank of India (RBI) has expanded the scope of exemptions under its circular for “opening of current accounts and cash credit (CC)/overdraft (OD) accounts” by banks, permitting them to open and operate inter-bank accounts and accounts of All India Financial Institutions (AIFIs), among others.
Further, the RBI has brought accounts attached by the orders of Central or State governments, regulatory bodies, courts, investigating agencies etc, wherein the customer cannot undertake any discretionary debits, within the purview of exemptions.
The four AIFIs referred to in the consolidated circular are EXIM Bank, NABARD, NHB and SIDBI.
The central bank said 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 a period of three months from the date of such monitoring.
Direct remittance
RBI underscored that banks should not route drawal from term loans through CC/ OD/current accounts of the borrower. Since term loans are meant for specific purposes, the funds should be remitted directly to the supplier of goods and services.
In cases where term loans are meant for purposes other than for supply of goods and services and where the payment destination is identifiable, banks shall ensure that payment is made directly, without routing it through an account of the borrower.
However, where the payment destination is unidentifiable, banks may route such term loans through an account of the borrower opened as per the provisions of the circular. Expenses incurred by the borrower for day-to-day operations may be routed through an account of the borrower
Non-disruptive implementation
Banks have also been asked to 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.
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