RBI eases rules for small biz in current A/Cs

The Reserve Bank of India (RBI) has partially rolled back some of the stringent norms barring banks from opening current accounts for borrowers towards whom they have no credit exposure.

“For borrowers, where the exposure of the banking system is less than Rs 5 crore, there is no restriction on the opening of current accounts or on the provision of cash credit/overdraft facility by banks, subject to obtaining an undertaking from such borrowers that they shall inform the bank, as and when the credit facilities availed by them from the banking system reaches Rs 5 crore or more,” the RBI said in a circular.

The norms limiting current accounts to lenders who have a credit relationship was introduced to prevent diversion of funds by borrowers. However, it also caused problems for some borrowers who had opened accounts with banks that could provide internet banking support that their lending banks could not.