The Reserve Bank of India has issued the Rural Co-operative Banks – Credit Risk Management (Amendment) Directions, 2025, introducing significant changes to enhance credit discipline and improve monitoring of fund flows across cash credit (CC), current account, and overdraft (OD) operations. Key definitions of CC, current accounts and OD facilities have been formally added, and a new Chapter VIA has been inserted to regulate how such accounts may be maintained. While CC accounts may continue without restrictions due to their working-capital nature, current and OD accounts are now subject to exposure-based conditions. Banks may freely maintain these accounts where the borrower’s total banking system exposure is below ₹10 crore. For exposures of ₹10 crore or more, only banks with at least 10% share in the aggregate or fund-based exposure may operate current or OD accounts; others may open only collection accounts, from which funds must be transferred to a designated account within two working days. Certain statutory, FEMA-driven, or regulator-mandated accounts are exempt from these restrictions.
The amendments also strengthen compliance and monitoring requirements for Rural Co-operative Banks. Banks must conduct half-yearly reviews, flag accounts in their CBS for effective monitoring and convert or close ineligible accounts within defined timelines. Robust safeguards prohibit the use of accounts for unauthorised third-party transactions, unregulated deposit-taking, or payment services unless expressly authorised by a financial regulator. Systems must be implemented to detect suspicious or pass-through activities, and term loan disbursements should preferably be made directly to identified beneficiaries to prevent diversion of funds. These amendments will come into effect from April 1, 2026, with the option for earlier voluntary implementation by banks.
Link – https://rbidocs.rbi.org.in/rdocs/notification/PDFs/NT1473A9FC9ECA73649A4B68870D9B51B0E95.PDF
