RBI current account proposal divides private, state-run banks

swered.

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The proposal may have far-reaching implications for banks' deposit and fee income structures.

(REUTERS)

That said, the RBI proposed that banks-whether they have loans to that borrower or not-can open collection accounts, which receive the customer's cash inflows.

However, RBI said money credited into these accounts will need to be remitted within two working days to a designated transaction account like a current account.

The proposal may have farreaching implications for banks' deposit and fee income structures.

"Suppose bank A has lent ₹90 crore and bank B has lent ₹10 crore to a company with ₹100 crore total borrowing. Currently, if the corporate's collections come into B's account, bank A could demand 90% of those funds, and this will be transferred to its current account. This would reduce bank B's current account balances," a banking expert said on the condition of anonymity.