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RBI asks banks to not open present accounts for purchasers having money credit score, overdraft amenities

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MUMBAI: With a view to enhance credit score self-discipline, the Reserve Financial institution on Thursday barred banks from opening present accounts for purchasers who’ve availed cash credit or overdraft facilities, stressing that there’s a “want for self-discipline” on this entrance.
In a notification, the central financial institution mentioned that moderately than opening a brand new current account, all transactions needs to be routed via money credit score (CC) or overdraft (OD) account.
Nevertheless, the RBI didn’t specify the precise causes for initiating such a transfer. It may be famous that in latest cases of fraud just like the over Rs 4,000 crore PMC co-operative Financial institution rip-off, it was found that a number of accounts had been opened.
Officers within the know mentioned the transfer will keep away from hoodwinking of the system and scale back the blind spots, which is able to in the end result in safety of depositors’ cash.
On Thursday, RBI governor Shaktikanta Das mentioned it’s “essential to take applicable measures for strengthening credit score self-discipline” and mentioned there are considerations emanating from the usage of a number of accounts by debtors which requires the necessity for safeguards for opening of such accounts by debtors availing credit score amenities from a number of banks.
Stating that there’s a “want for self-discipline” by the banks in opening present accounts, the RBI mentioned, “no financial institution shall open present accounts for purchasers who’ve availed credit score amenities within the type of money credit score (CC)/ overdraft (OD) from the banking system and all transactions shall be routed via the CC/ OD account”.
“Banks shouldn’t route drawal from time period loans via present accounts. Since time period loans are meant for particular functions, the funds needs to be remitted on to the provider of products and companies. Bills incurred by the borrower for each day operations needs to be routed via CC/ OD account, if the borrower has a CC/ OD account, else via a present account,” it added.
It can be famous that there’s a challenge to have a single buyer ID for each entity’s banking wants which is able to assist in the monitoring, however the identical shouldn’t be absolutely in place.
If a buyer opens a number of accounts and there’s no monitoring of finish use of funds, there’s a chance that the identical buyer might bask in maleficence by drawing down cash from the identical financial institution via a special account. There’s additionally a chance that the cash could possibly be used to repay the primary credit score facility and maintain utilizing the identical modus operandi which may doubtlessly result in a wider concern.

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