The Reserve Bank of India has issued the Regional Rural Banks – Credit Risk Management (Amendment) Directions, 2025, replacing Chapter VI of the original Directions with a new Chapter VIA governing the maintenance of cash credit (CC), current, and overdraft (OD) accounts. The revised framework aims to enhance credit discipline and improve monitoring of fund flows, particularly for borrowers with exposure of ₹10 crore or more to the banking system. While CC accounts remain unrestricted owing to their working-capital nature, current and OD accounts may be maintained only by banks holding at least 10% share in the borrower’s aggregate or fund-based exposure. Banks not meeting this criterion may operate only collection accounts, from which funds must be transferred to a designated account within two working days. Exemptions apply for accounts mandated under FEMA, statutory requirements, or used by entities regulated by financial sector regulators.
The amendments also introduce stronger compliance and monitoring requirements, including half-yearly reviews, CBS flagging of applicable accounts, and mandatory conversion or closure of ineligible accounts within specified timelines. Additional safeguards prohibit use of accounts for unauthorised third-party transactions, unregulated deposit-taking, or payment services, supported by systems to detect suspicious or pass-through activities. Term loan disbursements are to be made directly to the identified beneficiaries to prevent fund diversion. These amendments will come into effect from April 1, 2026, with Regional Rural Banks permitted to adopt them earlier if desired.
Link – https://rbidocs.rbi.org.in/rdocs/notification/PDFs/NT1459BB4C6B30BD84C29BD6317CE280E465A.PDF
