Opening of Current Accounts by Banks - Need for Discipline

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....om the banking system and all transactions shall be routed through the CC/OD account. ii. Where a bank's exposure^1 to a borrower is less than 10 per cent of the exposure of the banking system to that borrower, while credits are freely permitted, debits to the CC/OD account can only be for credit to the CC/OD account of that borrower with a bank that has 10 per cent or more of the exposure of the banking system to that borrower. Funds will be remitted from these accounts to the said transferee CC/OD account at the frequency agreed between the bank and the borrower. Further, the credit balances in such accounts shall not be used as margin for availing any non-fund based credit facilities. In case there is more than one bank having 10 per ....

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....requency agreed between the bank and the borrower. Further, the balances in such accounts shall not be used as margin for availing any non-fund based credit facilities. While there is no prohibition on amount or number of credits in 'collection accounts', debits in these accounts shall be limited to the purpose of remitting the proceeds to the said escrow account. Non-lending banks shall not open any current account for such borrowers. (b) In case of borrowers where exposure of the banking system is Rs.5 crore or more but less than Rs.50 crore, there is no restriction on opening of current accounts by the lending banks. However, non-lending banks may open only collection accounts as defined at (v) (a) above. (c) In case of....

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....m the date of this circular. Yours faithfully,   (Saurav Sinha) Chief General Manager-in-Charge --- ^1 Exposure' for the purpose of these instructions shall mean sum of sanctioned fund based and non-fund based credit facilities ============= Document 1 Customer approaches a bank for opening current account Less than 5 crore Flow chart for opening of current accounts Does the borrower have a CC/OD facility? Yes* No bank can open a current account. No *A separate flow chart in respect of CC/OD accounts is attached What is the aggregate amount of credit facilities availed by the borrower? *50 crore and more Any bank can open a current account, subject to undertaking....