The Reserve Bank of India issued amendments to its Rural Co-operative Banks – Credit Risk Management Directions, adding definitions for cash credit, current account and overdraft facilities and introducing a new framework governing how banks maintain cash credit, current and overdraft accounts to support stronger credit discipline and transaction monitoring. Cash credit facilities remain unrestricted, but current and overdraft accounts are treated differently based on the banking system’s aggregate exposure to a customer. Where system exposure is below INR 10 crore, current or overdraft accounts may be maintained without restriction. Where system exposure is INR 10 crore or more, only banks meeting a minimum 10% share of the banking system’s aggregate exposure or aggregate fund-based exposure to the borrower may maintain current or overdraft accounts, with specified fallbacks where no bank or only one bank meets the criteria; other banks may maintain only “collection accounts”, with receipts to be remitted to a borrower-designated cash credit, current or overdraft account within two working days, subject to debiting statutory dues and any dues to the collection-account bank. Exemptions apply for certain FEMA-related accounts, accounts or transactions required by statute or regulator or government instruction, and accounts of regulated entities used for their regulated activities, subject to controls on permitted use and remittance of surplus funds. The chapter also requires half-yearly compliance monitoring, notification within one month if a bank becomes ineligible to maintain a current or overdraft account and conversion or closure within three months, account flagging in core banking systems, and measures to prevent pass-through third-party transactions and unlicensed deposit-taking or payment services. The amendments take effect from April 1, 2026, with banks allowed to implement earlier.
Reserve Bank of India 2025-12-11
Reserve Bank of India amends rural co-operative banks credit risk directions to restrict current and overdraft accounts for borrowers with INR 10 crore or more system exposure
The Reserve Bank of India amended its Rural Co-operative Banks – Credit Risk Management Directions, defining cash credit, current account, and overdraft facilities, and establishing a framework for account maintenance to improve credit discipline and transaction monitoring. Banks with system exposure below INR 10 crore can maintain current or overdraft accounts without restriction, while those with exposure of INR 10 crore or more must meet specific criteria. Exemptions apply for certain accounts, and compliance monitoring is required, effective April 1, 2026.