The Reserve Bank of India issued amendments to its Payments Banks – Miscellaneous Directions to add a dedicated framework for payments banks’ maintenance of current accounts, linking permissible account types to a customer’s aggregate exposure to the banking system and introducing strengthened monitoring and misuse-prevention expectations. Under the amendments, a “current account” is defined as a demand deposit account permitting withdrawals any number of times (and is deemed to include other deposit accounts that are neither savings nor term deposits). Payments banks may maintain current accounts without restriction where aggregate banking-system exposure to the customer is below INR 10 crore, but may maintain only “collection accounts” where exposure is INR 10 crore or more. “Banking system” is defined to include commercial banks (including small finance banks, local area banks and regional rural banks, but excluding payments banks), urban co-operative banks and rural co-operative banks, while “exposure” is the sum of sanctioned fund-based and non-fund-based facilities from the banking system. Funds received in a collection account must be remitted within two working days to a borrower-designated cash credit, current or overdraft account with any bank in the banking system, after debiting statutory dues and any dues to the bank maintaining the collection account. Exemptions apply for certain Foreign Exchange Management Act accounts, accounts or transactions mandated by statute or by instructions of a financial sector regulator or government, and accounts of regulated entities used for regulated activities, subject to ensuring use only for permitted purposes and remitting any surplus to the designated account. Banks must monitor compliance at least half-yearly, flag relevant accounts in core banking systems, and, where a customer becomes ineligible for an unrestricted current account due to exposure rising to INR 10 crore or more, notify within one month and complete conversion to a collection account or closure within three months. Additional requirements include ensuring accounts are used only for the accountholder’s authorised business, prohibiting pass-through third-party transactions except where expressly licensed or authorised, preventing unauthorised deposit-taking or payment-service activity through accounts, and implementing monitoring to detect prohibited patterns. The amendments take effect from April 1, 2026, with an option for banks to implement earlier.
Reserve Bank of India 2025-12-11
Reserve Bank of India amends payments bank directions to require collection accounts for customers with INR 10 crore or higher banking system exposure
The Reserve Bank of India amended its Payments Banks – Miscellaneous Directions to establish a framework for payments banks' maintenance of current accounts, linking permissible account types to a customer's aggregate exposure. Payments banks can maintain unrestricted current accounts if exposure is below INR 10 crore, but must use "collection accounts" for exposures of INR 10 crore or more. Effective April 1, 2026, the amendments include strengthened monitoring and misuse-prevention measures.