The impact of the RBI's new rule is to close millions of current accounts in banks

The most serious impact of the new standard on small business houses

Accounts closed due to non-compliance of traders with cash credit or overdraft accounts

State Bank closes more than 50,000 accounts Instructions to banks not to open current accounts of borrowers who have loan accounts with other banks

MUMBAI: With the implementation of the Reserve Bank of India's (RBI) circular in August last year, millions of current accounts in the country's banks have either been closed or forced to suspend. It is the turn of small business houses to suffer due to the Reserve Bank's circular.

Banks are informing their account holders via email that their accounts have been closed or suspended. Banks are saying in their emails that the Reserve Bank has instructed banks not to open current accounts of borrowers who have loan accounts with other banks.

There are also allegations that private banks have leaked information to nationalized banks that they have taken cash credit or overdraft from them to snatch business from nationalized banks after a circular was issued not to operate more than one current account.

As per the instructions of the Reserve Bank, "We advise that you can continue with your branch, cash credit or overdraft account, but at the same time you will not be able to continue the current account, so it will have to be closed." This is stated in the e-mail sent by the bank to his account holder.

Sources in the banking sector said that SBI has closed more than 50,000 such accounts in the last few years after informing the account holders. In August last year, the Reserve Bank issued new rules for opening current accounts. As a rule, the borrower can have a current account with the same bank which has at least ten percent exposure to its total borrowing.

The new rules were initially given three months to comply, but were later extended to July 31 this year, RBI sources said. The rule is aimed at disciplining the use of the current account and monitoring cash flow. It came to the notice of the Reserve Bank that the borrowers were diverting money by opening multiple current accounts.