The Reserve Bank of India (RBI) on Monday issued a series of often asked concerns (FAQs) to clarify on its August 6 circular concerning opening of existing accounts. It also exempted seven categories of existing accounts from the definition of ‘aggregate exposure’ inside the ambit of the circular.
“On a review, it has been decided to permit banks to open specific accounts which are stipulated under various statutes and instructions of other regulators/ regulatory departments, without any restrictions placed in terms of the above-mentioned circular dated August 6, 2020,” the central bank mentioned in a notification.
Accounts for genuine estate projects, mandated below the Real Estate (Regulation and Development) Act, 2016, to keep 70% of advance payments collected from homebuyers, will not be incorporated as aggregate exposure to a borrower inside the purview of the circular. Nodal or escrow accounts of payment aggregators or prepaid payment instrument issuers for certain activities as also accounts for settlement of dues connected to debit card, ATM card and credit card issuers and acquirers will not be incorporated.
The exempted categories also contain accounts permitted below FEMA, 1999, and accounts for the objective of public gives, new fund gives (NFOs), share buybacks, dividend payments, issuance of industrial papers and allotment of debentures or gratuity, mandated by respective statutes or regulators and are meant for certain or restricted transactions only. Accounts for payment of taxes, duties and statutory dues opened with banks authorised to gather the similar, for borrowers of such banks not authorised to gather such taxes or dues will also not count towards the exposure limit. In addition, accounts of White Label ATM Operators and their agents for sourcing of currency have been exempted.
The RBI mentioned this permission was topic to the situation that the banks really should guarantee that these accounts had been utilized for permitted or specified transactions only. “Further, banks shall flag these accounts in the CBS (core banking system) for easy monitoring. Lenders to such borrowers may also enter into agreements/arrangements with the borrowers for monitoring of cash flows/periodic transfer of funds (if permissible) in these current accounts,” the notification mentioned.
Banks will be expected to monitor all existing accounts and money credit/ overdraft accounts (CC/ODs) frequently, at least on a half-yearly basis, especially with respect to the exposure of the banking method to the borrower, to guarantee compliance with guidelines contained in the circular dated August 6.
They will not be expected to acquire no-objection certificates (NOCs) just before opening existing accounts.
Responding to banks’ queries on how they ought to establish the aggregate exposure of the banking method to a borrower, the RBI mentioned they may well compute the aggregate exposure for the objective of these suggestions primarily based on the details accessible with Central Repository of Information on Large Credits (CRILC), credit details organizations (CICs), National E-Governance Services (NeSL), and by acquiring customers’ declaration, if expected.
The central bank also clarified that all fund-primarily based and non-fund primarily based credit facilities sanctioned by banks and carried in their Indian books – like daylight overdraft (DLOD)/ intra-day facilities, irrevocable payment commitments, limits set up for transacting in forex and interest price derivatives as also industrial papers (CPs) – shall be incorporated for the objective of aggregate exposure.
The August 6 circular mandated that banks which account for significantly less than 10% of the aggregate banking exposure to a significant borrower ought to open only collection accounts for that borrower. It also stated that no bank shall open existing accounts for buyers who have availed credit facilities in the kind of CC)/OD from the banking method and all transactions shall be routed by way of the CC/OD account.
The circular was aimed at enforcing far better repayment discipline amongst significant borrowers and stopping the siphoning of funds. Thereafter, banks had sought clarifications about what constitutes the definition of ‘aggregate exposure’, amongst other items.