The Reserve Bank of India (RBI) has withdrawn restrictions on cash credit (CC) accounts, offering relief to businesses and industries.
Earlier draft guidelines, issued in October, proposed limits on transactions for large borrowers to improve monitoring.
However, after feedback from industry groups and banks, the RBI decided to remove these restrictions.
This decision will boost the availability of working capital, helping businesses manage day-to-day operations more efficiently.
What Were the Draft Guidelines?
The October draft had suggested that:
Borrowers could choose only two transacting banks.
Banks could provide current account or overdraft facilities only if they held at least 10% of the total loan exposure to the borrower.
The intention was to strengthen oversight of large accounts.
However, industry stakeholders raised concerns that these rules could restrict access to working capital, especially for trading, MSME, and manufacturing sectors.
Changes After Feedback
After reviewing feedback, the RBI decided:
Cash credit restrictions are removed, allowing businesses to operate their accounts freely.
Any bank with over 10% exposure to a borrower can now handle current accounts or overdraft facilities, removing the earlier limit of just two banks.
These changes ensure businesses can maintain multiple banking relationships for smooth payments and collections.
Impact on Businesses
Experts say this move provides immediate relief to companies and the MSME sector.
Cash credit accounts are essential for daily expenses, purchases, and payments.
With restrictions lifted, businesses can manage cash flow more efficiently, ensuring smooth transactions within the banking system.
This decision is seen as a timely boost to economic activity, supporting growth across industries.
