The Reserve Bank of India (RBI) has released its final guidelines on how banks should maintain Cash Credit (CC), Current Account (CA), and Overdraft (OD) accounts.
These rules aim to improve credit discipline and transparency, while also giving some relief to businesses.
The guidelines are especially important for banking awareness, financial regulation, and competitive exam preparation.
Why RBI Introduced These Guidelines
Earlier, on October 1, 2025, RBI released draft rules and invited feedback from stakeholders.
The focus was on regulating transaction accounts like current and overdraft accounts to prevent misuse of funds.
After reviewing the suggestions, RBI finalized the rules.
Some relaxations were added, particularly for Cash Credit accounts, to make working capital financing easier.
Banks Covered Under the New Rules
The guidelines will apply to seven types of regulated entities, which form the core of India’s banking system:
Commercial Banks
Small Finance Banks
Payments Banks
Local Area Banks
Regional Rural Banks
Urban Co-operative Banks
State Co-operative Banks
When Will the New Rules Take Effect
The guidelines will come into force from April 1, 2026.
However, banks that are ready can implement them earlier if they wish.
Big Relief for Cash Credit (CC) Accounts
RBI has kept Cash Credit accounts outside the strict rules that apply to other transaction accounts.
Cash Credit facilities are mainly used for working capital needs.
They are linked to current assets like stock and receivables and are backed by assets.
Under the new rules, banks can freely provide CC facilities based on the customer’s needs.
There will be no restrictions, even if the borrower has high exposure across banks.
This change is expected to benefit businesses, especially MSMEs, by giving them more operational flexibility.
New Rules for Current and Overdraft Accounts
RBI has introduced different rules for CA and OD accounts based on the borrower’s total exposure across the banking system.
Borrowers With Exposure Below ₹10 Crore
If the total banking exposure is less than ₹10 crore, there are no restrictions.
Any bank can open and maintain current or overdraft accounts as required by the customer.
Borrowers With Exposure of ₹10 Crore or More
Stricter rules will apply to larger borrowers.
A bank can operate a CA or OD account only if it meets at least one of these conditions:
The bank holds at least 10% of the total banking system exposure, or
The bank has at least 10% fund-based exposure to the borrower
This ensures that only banks with a meaningful stake can control transaction flows, improving monitoring and risk management.
No Change in Remittance Rules
RBI has kept the existing remittance rule unchanged.
Funds received in collection accounts must be transferred to designated CC, OD, or CA accounts within two working days.
This rule helps maintain transparency and timely movement of funds.
Why These RBI Guidelines Matter
The new rules aim to:
Improve credit discipline
Prevent diversion of funds
Simplify banking rules for small borrowers
Make working capital financing easier
Strengthen the stability of the banking system
These guidelines are highly relevant for banking professionals and candidates preparing for RBI, banking, and financial regulation exams.
