RBI scraps plan to restrain banks on current accounts

The central bank’s draft proposal had triggered a pushback from private sector banks

- Subhana Shaikh [e-mail]

Private banks had argued that the proposed norms would effectively tilt the playing field in favour of public sector banks.

(REUTERS)

The Reserve Bank of India (RBI) has withdrawn its proposal that had said that only two banks should be allowed to open current accounts for a corporate borrower, with each of the lenders holding at least 10% of the total loans given by the entire banking sector to that company.

The RBI's draft proposal on current accounts for companies, released on 1 October, triggered a pushback from private sector banks.

On 11 November, Mint had reported that private banks had argued that the proposed norms would effectively tilt the playing field in favour of public sector banks, which dominate consortium lending and, therefore, enjoy higher exposure shares.

The proposal had also raised concerns around customer choice, digital transaction efficiency, and the adverse impact on private sector banks’ low-cost deposits.