Indian Banks’ Association requests RBI to exempt govt accounts from current accounts circular

Emails sent to the IBA and the RBI remained unanswered till the clip of going to press.

The Indian Banks’ Association (IBA) has requested the Reserve Bank of India (RBI) to exempt accounts held by the authorities with assorted banks from the purview of the August 6, 2020, existent accounts circular. The petition has been made connected the ground of feedback received from IBA’s subordinate banks, a banker alert of the improvement told FE.

If the cardinal slope accedes to this request, a slope volition not person to adjacent existent accounts held with it by the authorities adjacent if the bank’s vulnerability to the authorities is little than 10% of the latter’s full borrowings. The deadline for complying with the circular, aimed astatine preventing frauds, has been extended to October 31 from July 31, 2021.

“The intent of the circular is to forestall siphoning disconnected funds fixed by banks. In the lawsuit of the government, that tin hardly beryllium considered a risk. That is wherefore we person asked for an exemption,” the banker said.

Emails sent to the IBA and the RBI remained unanswered till the clip of going to press.

According to radical successful the industry, the authorities was unhappy with the thought of having to adjacent down immoderate of its existent accounts, which were successful usurpation of the presumption of the August 6 circular. Some banks adjacent faced the menace of being blacklisted by the government. In bid to resoluteness this struggle betwixt the regulatory mandate and the government’s wishes, banks person sought authorities accounts to beryllium excluded from the ambit of the circular, altogether.

While issues similar this proceed to hamper the implementation of the circular, bankers are taking solace from the RBI connection that issues which banks are incapable to resoluteness themselves shall beryllium escalated to the IBA for due guidance. “Residual issues, if any, requiring regulatory information shall beryllium flagged by IBA to the Reserve Bank for introspection by September 30, 2021,” the RBI had said connected August 4 portion extending the timeline for implementing the circular.

In the meantime, the circular continues to look a ineligible situation successful the Kerala High Court. Muthoot Fincorp and GEO VPL Finance person moved writ petitions against the circular. In its past proceeding successful the substance of August 12, the tribunal took enactment of the RBI’s submission, which was akin to its August 4 clarification. The adjacent proceeding successful the substance is scheduled for October 12.