RBI current account plan splits private banks, PSBs

Idea was to stop borrowers from keeping banks in dark about their cash flows

- Subhana Shaikh & Shayan Ghosh

A valiant effort by the central bank to clamp down on fund diversion has pitted India's private sector banks against their public peers, opening up a rift in the Indian Banks' Association (IBA).

The Reserve Bank of India (RBI) last month proposed that multiple banks cannot open current accounts for a borrower who owes ₹10 crore or more to the banking system. The regulator said only two banks, that account for at least 10% of the banking system's exposure to the borrower, can open these accounts.

The idea is to prevent a borrower from keeping his bank in the dark about the cash flows he receives in a current account maintained with another bank.