RBI Withdraws Proposal to Restrict Corporate Current Accounts

On December 11, 2025, the Reserve Bank of India (RBI) announced that it has withdrawn its earlier proposal to restrict corporate borrowers to maintaining current accounts with only 2 banks. The draft norms, released on October 1, had suggested that each of the 2 banks should hold at least 10% of the total loans extended by the banking system to the borrower.

The proposal faced strong opposition from private sector banks, which argued that the move would favour public sector banks that dominate consortium lending. The final guidelines now allow banks to offer current accounts based on customer requirements, removing the earlier cap entirely.

Background of the Proposal

The RBI’s draft proposal aimed to improve monitoring of borrower cash flows and reduce risks associated with multiple banking relationships. However, private banks raised concerns that the norms would limit customer choice and negatively impact digital transaction efficiency.

They also highlighted that the restrictions could reduce access to low-cost deposits for private lenders. The regulator reviewed stakeholder feedback before issuing the revised directions applicable to all categories of banks, including commercial banks, small finance banks, payments banks, and cooperative banks.

Revised Guidelines and Key Provisions

Under the new framework, banks may maintain current accounts or overdraft (OD) accounts without restrictions if the aggregate exposure of the banking system to the customer is less than ₹10 crore. For borrowers with higher exposure, a bank can maintain a current account if it holds either a minimum 10% share in the banking system’s aggregate exposure or a minimum 10% share in aggregate fund-based exposure.

In cases where only one bank has exposure to the borrower, one additional bank of the customer’s choice may maintain a current account, subject to a no-objection certificate (NOC) from the lending bank. If no scheduled commercial bank meets the criteria, the borrower may choose any one bank, provided NOCs are obtained from all lending banks.

Compliance and Operational Flexibility

The RBI has clarified that banks may include additional covenants in loan agreements in mutual agreement with borrowers. These covenants can be designed to ensure better monitoring and risk management while maintaining operational flexibility.

The regulator emphasised that the revised norms aim to balance competition among banks and improve transparency in managing borrower accounts. By removing the earlier cap, the RBI has addressed concerns related to customer convenience and banking efficiency.

Read More: RBI Revises Cash Credit and Overdraft Norms.

Conclusion

The RBI’s decision to scrap its earlier proposal on limiting corporate current accounts marks a significant shift in its regulatory stance. By allowing banks to maintain accounts based on exposure criteria and customer needs, the central bank has prioritised efficiency and competition.

The revised norms are expected to improve ease of doing business and support digital banking initiatives. This development underscores the regulator’s commitment to fostering a fair and transparent banking environment.

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