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RBI tweaks circular on current account opening by banks

October 29, 2021 root Banking & Finance

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The Reserve Bank of India (RBI) has tweaked its circular on “Opening of Current Accounts by Banks – Need for Discipline”, allowing borrowers, where exposure of the banking system is ₹5 crore or more, to maintain current accounts with any one of the banks with which they have Cash Credit (CC)/Overdraft (OD) facility.

However, this is subject to the condition that the bank has at least 10 per cent of the exposure of the banking system to them.

The central bank has also permitted banks to open/maintain the following accounts, without any restrictions in the case of inter-bank accounts, acounts of All India Financial Institutions, accounts opened under specific instructions of Central Government and State Governments, etc.

The latest circular, which banks have to implement within one month, does away with the separate norms for borrowers where exposure of the banking system is ₹5 crore or more but less than ₹50 crore and where exposure of the banking system is ₹50 crore or more for opening current accounts prescribed in the August 6, 2020 cricular.

The earlier circular resulted in blocking of borrowers’ (with exposure of ₹5 crore or more but less than ₹50 crore to the banking system) current accounts by banks as norms allowed maintenance of only collection accounts with non-lending banks.

Further, borrowers’ with exposure of ₹50 crore and above to the banking system could not open any current account with non-lending banks.

The central bank has now tweaked its circular taking into account feedback received from the Indian Banks’ Association (IBA) and other stakeholders.

As per the latest circular, in respect of borrowers where exposure of the banking system is ₹5 crore or more, other lending banks may open only collection accounts subject to the condition that funds deposited in such collection accounts will be remitted within two working days of receiving such funds, to the CC/OD account maintained with the bank maintaining current accounts for the borrower.

Borrowers with less than ₹5 crore exposure

For borrowers, where the exposure of the banking system is less than ₹5 crore, there is no restriction on opening of current accounts or on provision of CC/OD facility by banks.

This is subject to obtaining an undertaking from such borrowers that they shall inform the bank(s), as and when the credit facilities availed by them from the banking system reaches ₹5 crore or more.

RBI asked banks to monitor all accounts regularly, at least on a half-yearly basis, specifically with respect to the exposure of the banking system to the borrower, and the bank’s share in that exposure, to ensure compliance with its instructions.

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RBI eases current account rules for bank exposures less than Rs 5 crore, BFSI News, ET BFSI

October 29, 2021 root Banking & Finance

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The Reserve Bank of India on Friday eased current account rules for bank exposures less than Rs 5 crore, allowing lenders to open current account, cash credit and overdraft facilities without any restriction. The regulator asked banks to implement the changes within one month.

“For borrowers, where the exposure of the banking system is less than Rs 5 crore, there is no restriction on opening of current accounts or on provision of CC/OD facility by banks, subject to obtaining an undertaking from such borrowers that they shall inform the bank(s), as and when the credit facilities availed by them from the banking system reaches Rs 5 crore or more,” the RBI said in its guidelines.

For borrowers where the exposure is more than Rs 5 crore, will continue to maintain current accounts with any one of the banks with which they have cash credit or overdraft facility, provided that the bank has at least 10 per cent of the exposure of the banking system to that borrower.

The banking regulator also permitted banks to open and maintain inter-bank accounts, all accounts with institutions like EXIM Bank, NABARD, NHB, and SIDBI, accounts attached by orders of central or state government and investigative agencies without any restrictions.

In August last year, the banking regulator had introduced new rules for opening of current accounts, which mandated that a borrower can have a current account with only the bank which accounts for at least 10% of his total borrowing.

While banks were given three months to adhere to the new strictures, delay in implementation had forced the Reserve Bank to extend the deadline till July 31. The deadline was further extended to October 31, after thousands of current accounts were closed in the last few months, inconveniencing many firms and small business owners. SBI alone is said to have closed more than 60,000 such accounts.

The RBI also clarified that other lending banks will only be allowed to open collection accounts and the money deposited in those accounts will be remitted within two days of receiving the funds. The central bank also said that in case none of the lenders have at least 10% exposure of the banking system to the borrower, the bank having the highest exposure can open current accounts.

RBI’s new rules aim to discipline current account usage to monitor cash flows efficiently and control siphoning of funds by regulating an already over-regulated sector.

The RBI had observed that despite prevailing guidelines and penal provisions, borrowers have been diverting and siphoning off funds by opening multiple current accounts with different banks. While the intent is clear, the need to bring in credit discipline has caused a lot of disruption.

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Bank credit grows 6 pc in June, BFSI News, ET BFSI

September 1, 2021 root Banking & Finance

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Bank credit grew at a slower pace of 6 per cent in June compared to 6.4 per cent in the year-ago period mainly due poor offtake in metros, RBI data showed on Tuesday. Year-on-year growth in credit by private sector banks at 10.1 per cent was much higher than that for public sector lenders at 3.1 per cent, as per the data.

“Bank credit recorded 6.0 per cent growth (y-o-y) in June 2021 (6.4 per cent growth a year ago): bank branches in urban, semi-urban and rural centres recorded double-digit credit growth but it moderated for metropolitan branches to 2.7 per cent (5.1 per cent a year ago),” according to the RBI’s ‘Quarterly statistics on deposits and credit of SCBs: June 2021’.

The aggregate deposits growth (y-o-y) stood at 10 per cent in June 2021 compared to 11.5 per cent a year ago.

In this case too, deposit accretion in private sector banks grew at a faster pace vis-a-vis their public sector counterparts.

RBI also said the share of current account and savings account (CASA) deposits in total deposits increased further to 43.8 per cent in June 2021 as against 42 per cent in the year-ago period.

Also, as deposit growth outpaced credit growth, the all-India credit-deposit (C-D) ratio moderated to 70.5 per cent in June 2021. The C-D ratio declined for all bank groups, except for regional rural banks.

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Private banks’ deposits surge, but loans slow, BFSI News, ET BFSI

July 6, 2021 root Banking & Finance

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Private sector banks’ deposits have surged but advances remained subdued due to lockdown restrictions.

Except for HDFC Bank, which registered a strong 14.4 per cent growth in its advances to over Rs 11.47 lakh crore as of June 30 this year, most banks bucked the trend as people preferred to park money in banks and shunned loans.

IndusInd Bank

IndusInd Bank witnessed a 7 per cent growth in its net advances to more than Rs 2.11 lakh crore at the end of June this year, according to a regulatory filing.

The net advances stood at Rs 1.98 lakh crore at the end of June 30, 2020.

On a quarter-on-quarter basis, the net advances were down 1 per cent from Rs 2.13 lakh crore recorded at the end of March 2021, the bank said in the regulatory filing on Monday.

Deposits registered a jump of 26 per cent to Rs 2.68 lakh crore at the end of the June quarter this fiscal. In the year-ago period, the same stood at Rs 2.12 lakh crore.

Out of the total amount, retail deposits and deposits from small business customers amounted to Rs 1.06 lakh crore in the latest June quarter compared to Rs 95,811 crore in the year-ago period.

Bank’s CASA (Current Account Savings Account) ratio stood at 42.1 per cent as of June 2021, up from 40.1 per cent in the same period a year ago.

Yes Bank

Yes Bank’s loans and advances fell by a marginal 0.4 per cent to Rs 1.63 lakh crore by the end of June 30, 2021, data from the bank showed on Monday.

The loans and advances stood at Rs 1,63,914 crore as of June 30, 2021, as compared with Rs 1,64,510 crore in the year-ago period, registering a marginal decline of 0.4 per cent on a year-on-year basis, Yes Bank said in a regulatory filing.

However, the bank said that the figures by June end of this year are provisional and subject to the approval of the audit committee, board of directors, and statutory auditors.

Compared sequentially, it was down by 1.8 per cent from Rs 1,66,893 crore by March 31, 2021.

The gross retail disbursements during the June-ended quarter stood at Rs 5,099 crore as against Rs 424 crore during the previous year and Rs 7,828 crore in the March quarter.

Bank’s liquidity coverage ratio by June 2021-22 stood at 118.4 per cent, higher than 114.1 per cent from a year ago.

The deposits jumped by 39.1 per cent to Rs 1,63,295 crore by the end of June from Rs 1,17,360 crore in the year-ago period. It rose by a marginal 0.2 per cent from Rs 162,947 crore worth of deposits as of March 2021.

Federal Bank

Federal Bank Ltd reported a 9% on-year rise in total deposits, and a 19% increase in current account and savings account as of Jun 30. Total deposits stood at Rs 1.69 lakh crore, while current account and savings account stood at Rs 58,959 crore. Gross Advances rose 8% on the year and fell 2% sequentially to Rs 1.3 lakh crore. CASA ratio rose to 34.81% from 32.02% a year ago and 33.81% a quarter ago.

HDFC Bank

Except for HDFC Bank, which registered a strong 14.4 per cent growth in its advances to over Rs 11.47 lakh crore as of June 30 this year, most banks bucked the trend.

HDFC Bank’s advances aggregated to approximately Rs 11.4 lakh crore as of June 30, 2021, a growth of around 14.4 per cent over Rs 10 lakh crore as of June 30, 2020, and a growth of around 1.3 per cent over Rs 11.3 lakh crore as of March 31, 2021,” HDFC Bank said in a regulatory filing.

The private sector lender said its domestic retail loans by the end of the first quarter of the current fiscal moved up by 10.5 per cent year-on-year, while the domestic wholesale loans grew by around 17 per cent.

Among loan categories, retail loans grew by around 9 per cent over June 30, 2020, and were lower by around 1 per cent as compared to March 31, 2021.

Commercial and rural banking loans grew by around 25 per cent over June 30, 2020, and around 4 per cent over March this year. Other wholesale loans grew by around 10.5 per cent over June last year and around 1.5 per cent over March 2021.

Retail disbursements during Q1 FY22 stood at about Rs 43,600 crore, 202 per cent up from the year-ago period. However, it was down by 30 per cent from Rs 62,500 crore during the quarter ended March 2021.

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Equitas SFB waives off non-maintenance fees for current account holders

July 5, 2021 root Banking & Finance

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Equitas Small Finance Bank (ESFB) has said that it has waived off non-maintenance charges (NMC) for its current account holders.

Equitas SFB will be one amongst the first private sector banks to waive off NMC across CASA, thereby making banking simple and limitless, said a statement.

The bank further said that the transactions will be charged if balance falls below 75% of the requirement and hence accommodating customers for months with low turnover and ensuring complete support to businesses. This combination of waiver of non-maintenance charges and free transactions limit will be of immense advantage to entrepreneurs, traders, self-employed professionals and small businesses impacted during both the Covid-19 waves by enabling them to focus on business, it said.

Customers with low transactions intensity and high liquidity can avail Sweep-in Sweep-out FD facility, which enables the current account holders to earn from the idle funds.

“The waiver of non-maintenance charges is a crucial step forward to aid our customers in strengthening their financial resilience and to enjoy banking, stress-free. The Sweep-In Sweep-Out FD service where the Current Account holders get interests on their idle funds is an ideal means to help them enhance their savings while they focus on building their small businesses,” said Murali Vaidyanathan, Senior President & Country Head, Branch Banking Liabilities Product & Wealth, ESFB.

There are more support measures for the small businesses by the bank. It has also announced some support for the small businesses led-by women in metro/urban locations. It will offer a 50% waiver of AMB (average monthly balance) for Business Prime, Advance and Trade-in Current Account.

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