India

Indian banks get extra time to comply with revised current account rules

2 minute read

The Reserve Bank of India seal is pictured on a gate outside the RBI headquarters in Mumbai, India, February 2, 2016. REUTERS/Danish Siddiqui

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MUMBAI, Aug 4 (Reuters) - The Reserve Bank of India said it will give banks an extra three months until Oct. 31 to implement revised rules on opening and maintaining current accounts.

The central bank's rules aim to clamp down on people opening multiple accounts to borrow money. They have already led to current accounts being frozen or closed and micro, small and medium enterprises have been the worst hit, bankers said.

In August last year, the RBI had said banks with little or no loan exposure to a customer could not open a current account for them. Existing non-compliant accounts had to be frozen.

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The central bank also prohibited banks from opening a current account if their exposure was less than 10% of the borrowers' total exposure to the banking system.

"The instructions were issued to enforce credit discipline amongst the borrowers as well as to facilitate better monitoring by the lenders," the central bank said.

The RBI had last set a deadline of July 31, 2021 for the banks to comply.

"We have in the meantime received requests from the banks for some more time to resolve the operational issues while implementing the circular in letter and spirit," the RBI said in its latest notification.

The central bank said to ensure that its instructions are implemented in a non-disruptive manner, banks will have until October 31, 2021 to implement the provisions.

"This extended timeline shall be utilised by banks to engage with their borrowers to arrive at mutually satisfactory resolutions."

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Reporting by Swati Bhat. Editing by Jane Merriman

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