Imp: New RBI regimen on opening of current accounts & cash-credit accounts by cow. New rules likely to benefit corproate lenders like SBI, BOB, PNB,will take away CA float from banks like HDFC, ICICI, Axis which have good cash Mgmt products, but don’t lend to mid-corproates.1/7
Now banks can’t open current accounts for borrowers who have a cash credit account with any other bank.If borrowers don’t have any cash-credit account with any bank, they fall under 3 categories:
Those w/ under-5cr loans from banks: for these cos banks can open curr Acct 2/7
Those w/ under-5cr loans from banks: for these cos banks can open curr Acct 2/7
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
For borrowers w/ over 50 cr loans, one lender bank has to open an escrow account &only this bank can open current Acct. Other banks can open collection accts , but no Non fund based facility can be given on balances in these accts; non-lending banks can’t open CAs 4/7
small banks will be hit: 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 co 6/7
Bankers await FAQ from RBI on how &when database on lenders wil be put together Drawing from RBIs CRILIC and other credit bureaus. Also how wil these be monitored. New rules however diluted versus discussion paper which was more favourable to lending banks 7/7 @latha_venkatesh
