New RBI regimen on opening of current accounts & cash-credit accts by companies likely to benefit corporate lenders like SBI, BOB, PNB, Canara; may take away curr acct float from banks like HDFC, ICICI, Axis which have good cash Mgmt products, but don’t lend to mid-corproates.1/7
Hereafter Banks can’t open current account for borrowers who have cash credit account with any other bank.
If borrowers don’t have any cash-credit account with any bank, they fall under 3 groups:
1. For those with under-5cr loans from banks: banks can open curr Acct 2/7
If borrowers don’t have any cash-credit account with any bank, they fall under 3 groups:
1. For those with under-5cr loans from banks: banks can open curr Acct 2/7
2. For Borrowers with 5-50 cr loans from banking system, only lending banks may open curr Acct., non lending banks may only open collection accts ie these accounts can receive money which have to be paid into the cash-credit Acct.3/7
3. For borrowers with over 50 cr loans frm banking system, one lender bank to open escrow acct &only this bank can open curr Acct. Other banks can open collection accts, but no Nonfund based facility to be given on balances in these accts; non-lending banks can’t open CAs 4/7
This is cruel for small banks: For cash-credit &overdraft (CC/OD) facility, banks with over 10% exposure can open CC/OD accts; other lenders can have collection accounts; but have to debit money only to CC/OD accounts of banks that have more than10% exposure to borrower5/7
Intent of new curr Acct & CC/OD rules is to ensure banks who have lent, can monitor cash flows of borrower. But this makes it tough for smaller banks to garner fresh current accounts,as they are unlikely to have 10% exposure to a mid corporate company 6/7
Bankers say they await FAQ from RBI on how &when the database on lenders wil be put together drawing from RBIs CRILIC and other credit bureaus. Also how wil these be monitored. New rules are however diluted versus discussion paper which was more favourable to lending banks 7/7
