RBI Tightens Current Account Rules for Borrowers With Rs 10 Crore Exposure

The Reserve Bank of India has issued revised guidelines on the opening and operation of current accounts, cash credit accounts, and overdraft facilities by borrowers with aggregate banking exposure of Rs 10 crore or more. The new framework, effective from April 1, 2026, tightens controls on where large borrowers can maintain current accounts, imposes periodic review obligations on banks, and introduces stricter timelines for addressing non-compliance. The rules apply to all scheduled commercial banks, small finance banks, payments banks, and regional rural banks, as well as cooperative banks.

The 10 Percent Exposure Threshold

Under the revised framework, only a bank that holds at least 10 percent of the borrower's total banking exposure is permitted to operate a full current account or cash credit/overdraft facility for that borrower. This threshold is designed to ensure that banks with meaningful lending exposure maintain oversight over the borrower's fund flows, reducing the risk of fund diversion. A borrower with Rs 10 crore or more in aggregate exposure cannot simply open current accounts at banks where it has no or minimal borrowing relationship. The 10 percent threshold is calculated based on the borrower's total fund-based and non-fund-based exposure across the entire banking system.

Collection Accounts for Non-Eligible Banks

Banks that do not meet the 10 percent exposure threshold for a particular borrower are permitted to maintain only a collection account for that borrower. A collection account is a restricted-purpose account: funds deposited into it must be transferred to the borrower's designated current account or CC/OD account within two working days. The collection account cannot be used for withdrawals, and the borrower cannot be issued cheques, debit cards, or other payment instruments against it. This effectively limits the borrower's ability to operate bank accounts at institutions that do not have a significant lending relationship, channelling all operational banking through lenders with adequate exposure and monitoring capabilities.

Periodic Review and Enforcement Timelines

All banks are now required to review every relevant borrower's current account and CC/OD arrangements twice a year to verify compliance with the exposure thresholds. If a review reveals a violation, the bank must issue a notice to the borrower within one month of detection. The borrower then has three months to either rectify the non-compliance (by increasing the bank's exposure share or closing the account) or the bank must convert the current account into a collection account or close it entirely. These timelines are significantly tighter than the previous framework, which did not prescribe specific enforcement periods. The semi-annual review requirement ensures that compliance is an ongoing obligation, not a one-time check at the time of account opening.

Relief for Smaller Borrowers

Borrowers with total banking exposure below Rs 10 crore are not subject to these restrictions. They can continue to open and operate current accounts with any bank without the 10 percent exposure threshold applying. This carve-out ensures that small and medium enterprises, which often maintain banking relationships with multiple institutions for operational convenience, are not burdened by the stricter controls designed for large borrowers. The Rs 10 crore threshold captures borrowers where the risk of fund diversion is material enough to warrant centralised monitoring.

Practical Takeaways

Companies with aggregate banking exposure of Rs 10 crore or more should immediately review their current account arrangements across all banks and verify that each bank meets the 10 percent exposure threshold. Treasury and finance teams should map their banking relationships against their exposure data to identify accounts that may need to be converted to collection accounts or closed. Banks should update their account opening and review processes to incorporate the new thresholds and enforcement timelines. CFOs and in-house counsel should ensure that operational banking arrangements do not inadvertently breach the revised rules, as non-compliance could result in disruption to payment operations if accounts are converted or closed at short notice.