The Reserve Bank of India (RBI) announced new rules pertaining to the opening up of the new current accounts with the banks. One of the industry practices has been that private sector banks have moved very fast to provide cash management solutions to attract current accounts. There is no interest paid on money kept in such accounts.
The RBI has said that borrowers hereafter will open a current account only from banks from whom they have a substantial amount of borrowing. Therefore, banks that have lent them more than 10 percent of their total exposure shall alone be eligible for opening a current account.
The other banks can open collection accounts. The idea is the bank, which has given loans to a borrower should be able to see the cashflow. Therefore it is not just the lead bank but any bank which is more than 10 percent exposure has the right to have the current account.
Saloni Narayan, deputy MD and COO at State Bank of India (SBI), G Padmanabhan, non-executive chairman at Bank of India and Seshadri Sen, head-research at Alchemy Capital Management shared their views and outlook on this new directive.