Banks close hundreds of thousands of checking accounts, customers open claim accounts

Indian banks have closed hundreds of thousands of current accounts, embarrassing many small business owners as the time for complying with a Reserve Bank of India directive is over.

Banks have sent emails to customers regarding closing or freezing their checking accounts, citing RBI rules that do not allow lenders to open such accounts for borrowers who have loans with others. banks.

“As per the RBI instructions, we inform you that while you can continue to maintain your credit / cash overdraft account with the branch, your checking account will need to be closed as it can no longer be maintained while enjoying the CC / OD facility ”, one of these letters sent by

to a customer reading. “We kindly ask you to arrange for the closure of your checking account within 30 days. ”

SBI alone is said to have closed more than 60,000 accounts after sending repeated reminders to clients.

In August last year, the banking regulator introduced new rules for opening current accounts, which required a borrower to have a current account only with the bank which represents at least 10% of his total borrowing. With banks having three months to comply with the new restrictions, the delay in implementation forced the Reserve Bank to extend the deadline until July 31.

The rule aims to discipline the use of the current account to effectively monitor cash flow and control the siphoning of funds by regulating an already overregulated industry. The RBI had observed that despite the guidelines and penal provisions in force, borrowers embezzled and siphoned funds by opening multiple checking accounts with different banks.

While the intention is clear, the need for credit discipline has caused much disruption.

“We were forced to close thousands of accounts, for the entire banking system these account closings would cost thousands of dollars,” said a senior official at a public sector bank. “The realignment and compliance of all existing accounts has been a difficult task and the transition has by no means been smooth. ”

Several customers have taken to the microblogging Twitter site to express their anguish. A client of ICICI Bank requested the intervention of Minister of Finance Nirmala Sitharaman.

“Ma’am, please help MSME bank accounts frozen by ICICI Bank without warning,” Ramesh Chandran tweeted, adding: “3 of 4 frozen current accounts, RBI circular asking companies to only have one account with OD facility. ”

Another user, Mohan Bhargav, complained that he was having difficulty opening an account with HDFC Bank because he had an OD account with Bank of Maharashtra.

Another person complained that Union Bank froze their checking account on an ad hoc basis, citing heavy fines imposed by the RBI.

While bankers say they are aware of the difficulties faced by clients, they say enough time has been given to close these accounts. “We have sent out several reminders to clients since last year, as well as follow-ups by our relationship managers to close these accounts, but many borrowers did not take this seriously and waited until the last moment to deal with the fallout, “said a private bank executive. noted.

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