Several Founders, Co-Founders, CXO Bankers, CXO Fintech professionals & people who participated in the ePanel discussions:
- Mr. Sugata Dutta, International Training Assessor & Banking Domain expert for E-Learning Platforms
- Mr. R Bhaskaran, Strategic Training Advisor in Banking & Finance
- Mr. Abhishek Arun, former Chief Operating Officer, Paytm Payments Bank
- Mr. Tanu Bhargava, Head – Strategic Clients Group, Corporate Banking at Axis bank
- Mr. Sunil Kulkarni, CEO (Designate)- SRO & Head, Business Correspondent Federation of India
- Mr. Sugata Ghosh, Associate Editor at The Economic Times, BCCL
- Mr. P B Prakash, Head-Financial Institutions Group, IndusInd Bank
- Mr. Raj K Prasad, Sr. VP & Head- Trade & Forex Products & Services at Axis Bank
- Mr. Neeraj Chandra, Head of Operations and Technology, India, Abu Dhabi Commercial Bank
- Mr. Rakesh Shetty, Product Head Micro Loans, Fortune Credit Capital Ltd
- Mr. Vikas R Panditrao, Co-Founder, Forum of Industry and Academic Knowledge Sharing (FIAKS)
- Many other CEO/CXO Bankers & Fintech professionals on FIAKS Forum requested to remain anonymous
RBI issued guidelines for implementation of the circular on the opening of Current Accounts by Banks [1]
But the regulator could have planned better, there should be a common database to check who has taken lending and what amount;
- Another case of over-regulation or rather protectionism and parochialism in the guise of regulation which is becoming the hallmark these days.
- This is coming from PSU banks wanting control of flows of accounts where lending has been done by them. PSU banks are on the beneficiary side who have never bothered to innovate or even take control of their customers but preferred to do the easiest thing in banking i.e. to lend. Now the referee has got into the field with their stick and scoring goals for PSU banks. Nothing new, Vodafone, MasterCard, Amazon!
- The main people affected are foreign banks who have built up their current account franchise over decades of hard work and investment in technology and people.
While some are of the view that RBI is correct;
- RBI’s point of regulating cash flow is valid. Another important point is that the lending bank may not necessarily have a good retail presence. For multi-state NBFCs with cash collection, it becomes difficult to operate with only one lending bank.
- Default by corporate borrowers was high as they opened a current account with other banks and diverted funds. Some corporates started new ventures as well. At times banks also pursued such accounts due to the CASA target. Actually, while lending banks should have ensured that the borrower has all accounts with them to avoid diverting funds. In fact, it was well known that the sales reported in the P/l did not match with the total credits in the accounts. Banks could not however legally stop such diversion. No wonder corporate NPA is very high now. RBI is doing what banks should have done by themselves. Member feels this regulation was long overdue.
Let’s talk about impact;
- This is painful in the short term but also puts a question to private and MNC banks to lend vs just enjoying flows.
- It is not really regulating opening current accounts. It is more regulating a company’s cash flows through the bank that has given a loan, or bank that has the highest exposure. Companies have been taking loans (this is even Pre-Covid), the loan becomes NPA and companies would continue to do business by opening accounts with other banks and move all cash flows through those accounts. All big or small companies have been doing that.
- In order to make sure that the main bank that has given the loan does get cash flows in the loan account, this provision has been built. Now that RTGS is also 24×7, funds movement from so-called collection account to main current account is 24×7 and does not lead to intra-day liquidity issue, is what regulator thinks, which is a reasonable assumption. Having said that there are exceptions where an indicative list of situations where companies have been exempted from this provision.
Talking about funds diversion and cash management services;
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