Responding to reports over the last few days, of small businesses being hit with account freezes, the Reserve Bank of India (RBI) on Wednesday allowed banks time till October 31 to implement changes on the current account front.

The central bank said the circular is aimed at enforcing credit discipline among borrowers and to facilitate better monitoring by lenders, but made it clear a “graded approach” had been prescribed to banks on opening and operating of current accounts and cash credit/overdraft facilities.

“Banks were required to implement these instructions in a non-disruptive manner, while keeping the bonafide business requirements of borrowers in mind,” the RBI said.

Over the last few days, small businesses have complained their accounts were being frozen by banks while the latter were implementing a slew of RBI circulars, the last one being on December 14, 2020.

RBI on Wednesday said it has received requests from the banks for some more time to resolve operational issues while implementing the circular in letter and spirit, for which it is now extending the date of implementation.

“Banks will be permitted till October 31, 2021 to implement the provisions of the circular. This extended timeline shall be utilised by banks to engage with their borrowers to arrive at mutually satisfactory resolutions within the ambit of the circular,” it said.

If a bank is unable to resolve any issue, it can be escalated to the Indian Banks Association (IBA) for guidance, and residual issues can be taken up for redress with RBI by the industry lobby group, RBI said.

Accounts of White Label ATM operators and their agents are exempt from provisions of the Current Account circular dated August 6, 2020, it said, adding that as cash-in-transit (CIT) companies or cash replenishment agencies (CRAs) essentially carry out a similar activity, the exemption would be applicable to these entities as well.

It also asked banks to put in place a monitoring mechanism, both at head office and regional/zonal office levels, to monitor non-disruptive implementation of the circular and to ensure that customers are not put to undue inconvenience during the implementation process.

RBI also made it clear that banks are not permitted to open current accounts for borrowers who have availed agricultural/personal OD or OD against deposits.

It reiterated that in the case of borrowers who have not availed CC/OD facility from any bank, there is no restriction on opening of current accounts by any bank, if exposure of the banking system to such borrowers is less than Rs 5 crore.

The restriction applies to borrowers in case they avail of CC/OD facility, since all operations that can be carried out from a current account can also be carried out from a CC/OD account, as banks in a CBS environment follow a one-bank-one-customer model as against a one-branch-one-customer model, it said.