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Business News: RBI extends deadline for shifting of current accounts till Oct 31

Banks in the interim had frozen thousands of accounts on the credit side

Business News: The Reserve Bank of India (RBI) on Wednesday gave banks time till October 31 to comply with its guidelines on current account and overdraft facilities. The central bank indicated that it was in no mood to change the proposed rules, but would only allow for stretching the timeline for smoother implementation.

The initial deadline had ended on July 31, leading to thousands of current accounts being closed or frozen by banks. Lenders had requested the RBI for some more time to resolve the operational issues in implementing the provisions of the August 2020 circular in letter and spirit.

According to bankers, the accounts that were frozen can now be operationalised for three more months, during which banks would be able to iron out the issues. State Bank of India Chairman Dinesh Khara said while most of the challenges had already been addressed, the timeframe given by the RBI was reasonable “to engage with clients on the matter”.

“Banks will be able to resolve the outstanding issues harmoniously in this period,” Khara said. The frozen accounts, he said, could now be reopened for the ease of migration to a new arrangement.

Till now, banks were closing accounts or freezing them unilaterally, but now they will have to consult the clients about the migration path, bankers say.
A senior banker with a private bank said most current accounts were frozen and not closed outrightly. The debit side was kept open, while the credit side was frozen. That means the accounts could be used for payment, but no fresh money was allowed to be deposited in them.

However, there are some cases where accounts have been closed permanently.

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