The Reserve Bank’s new guidelines on current account have made the foreign banks jittery, as they will not be able to garner nil-interest funds from corporate in the name of providing better services than their domestic counterparts, said a senior banker.
As per the latest RBI guidelines, a bank opening a dedicated current account of any company with Rs 50 crore or more in debt must have at least 10 per cent loan exposure in the concerned business entity.
Most foreign banks manage current accounts of corporate without providing any loan to them. So far, foreign banks used to manage the large current accounts of India Inc with virtually little or no exposure, the senior executive of a public sector bank said.
Lending used to come from domestic banks but current account management were with foreign banks as they promised better services and other incentives, the banker added.
Without having any liability, another banker said, foreign banks were managing large current accounts where interest outgo was nil but the latest guideline from the Reserve Bank of India will put a curb on this practice.
Since public-sector banks do the bulk of corporate lending, they stand to gain from these guidelines on current accounts.On August 6, the RBI had observed that the checks and balances put in place in the existing framework for opening current accounts are inadequate.