RBIs current account policy hits 500 businesses

Aurangabad, Aug 3:

In order to discipline the process of opening a current account and stop businesses from opening multiple current accounts in various banks, the Reserve Bank of India (RBI) issued a circular last year to freeze such accounts. Hence nearly 500 businesses and companies, large and small, are facing temporary disruptions as banks freezed their current accounts to comply with the banking regulator’s directive.

In a bid to enforce credit discipline and check diversion of funds, the RBI had put in place certain safeguards for the opening of current accounts by banks in August last year. As per rules, banks cannot open multiple current accounts for borrowers where their exposure is less than 10 percent of the borrower’s total exposure to the banking system. The RBI had extended the deadline to July 2021. Now, as the deadline ends, several such accounts have been closed or frozen by banks to adhere to RBI rules, which has caused huge disruption for 500 such account holders- mostly businesses, traders and entrepreneurs in the city. According to MASSIA president Narayan Pawar, the banks have blocked several current accounts of entrepreneurs and businesses and their funds were locked. As a result, the supplier payments were stuck and business was at a standstill. Companies were under difficulty after their current account was frozen by banks. Sudden freezing has impacted several businesses for the past few days. We are told that this is being done to comply with RBI guidelines. The banks were already aware of the circular of the RBI. Yet, the current account holders were not informed. Similarly, payments of income tax, GST and custom duty are linked to this account. As a result, all transactions have come to a standstill.

What bankers say

The intent behind the rule is good, but it has inconvenienced a lot of customers. They are not happy about it, said the head of a public sector bank. It is a short term inconvenience for customers. For banks, of course, it will lead to more hits as banks lose cheap source of funds. Many MSMEs, other borrowers often open parallel accounts because they don’t want to do all transactions in a current account with a bank where they have the loan account since the bank can easily claim that money for loan recovery, the banker added.