RBI Eases Cash Credit Restrictions

Mumbai, Dec 11 (PTI) The Reserve Bank of India on Thursday eased restrictions on cash credit facilities after stakeholder feedback on draft norms.

The central bank said, "It has been decided to remove the restrictions on cash credit facilities as these accounts are operationally different from current accounts and overdraft accounts".

The draft issued in October had suggested some restrictions in case of borrowers of over Rs 10 crore across the system.

"Any two lending banks within the banking system, as per the choice of the borrower, can maintain transaction accounts, provided that each of such banks has either a minimum 10 per cent share in banking system's aggregate exposure to the borrower, or a minimum 10 per cent share in banking system's aggregate fund-based exposure to the borrower," the draft on 'Transaction Account Drections' had suggested.

The RBI said stakeholders' feedback suggested that the restrictions on cash credit accounts may be reviewed to ensure that the availability of working capital finance is not constrained, following which it has made the revision.

The apex bank also accepted suggestions, seeking reconsideration of the limit of two banks for maintaining transaction accounts.

"It has been decided to permit any lending bank with exposure greater than 10 per cent to maintain a current account or overdraft account," RBI said on Thursday.

The RBI did not accept some other suggestions, including ones on monitoring transactions and ensuring compliance.