The Reserve Bank of India (RBI) has issued comprehensive amendments to credit risk management rules that will significantly impact how businesses maintain current accounts and overdraft facilities. These changes, announced on December 11, 2025, come into effect from April 1, 2026.
If your business has borrowings of ₹10 crore or more from the banking system, these new rules will directly affect which banks can maintain your current accounts and overdraft facilities.
Key Changes at a Glance
The RBI’s Amendment Directions 2025 introduce a tiered framework based on total banking system exposure. The central change revolves around a ₹10 crore threshold that determines account maintenance eligibility.
What is Banking System Exposure?
For these rules, “banking system exposure” includes all sanctioned fund-based and non-fund-based credit facilities across:
- Commercial banks (including Small Finance Banks, Local Area Banks, and Regional Rural Banks)
- Urban cooperative banks
- Rural cooperative banks
Payments Banks are excluded from this definition.
Rules for Businesses Below ₹10 Crore Exposure
Good news for smaller businesses: If your total exposure to the banking system is less than ₹10 crore, you can maintain current accounts or overdraft accounts with any bank without restrictions.
This means business as usual for most small and medium enterprises.
Rules for Businesses with ₹10 Crore or More Exposure
When your banking system exposure reaches or exceeds ₹10 crore, new restrictions apply on which banks can maintain your current and overdraft accounts.
Eligibility Criteria for Banks
A bank can maintain your current account or overdraft account only if it has:
- At least 10% share in the banking system’s total exposure to your business, OR
- At least 10% share in the banking system’s total fund-based exposure to your business
Special Provisions
When no bank meets the criteria: If no bank meets the 10% threshold, or only one bank qualifies, the two banks with the largest exposures can maintain your accounts.
Single lender scenario: If only one bank has exposure to your business, you can choose one additional bank for maintaining accounts, provided you obtain a No Objection Certificate (NOC) from your existing lender.
Scheduled Commercial Bank preference: If you want a current account with a Scheduled Commercial Bank but none meets the eligibility criteria, you can open an account with any SCB of your choice—subject to obtaining NOCs from all your existing lenders.
Understanding Collection Accounts
Banks that don’t meet eligibility criteria can only maintain “collection accounts” for affected borrowers.
What is a Collection Account?
A collection account is a restricted current or overdraft account primarily used for receiving cash inflows. The key restrictions include:
Two-day remittance rule: All funds credited to a collection account must be transferred within two working days to a designated account (your main current account, cash credit account, or overdraft account) with an eligible bank.
Limited debits allowed: You can only debit statutory dues like taxes and any dues to the bank maintaining the collection account before remitting funds.
Overdraft restrictions: If your overdraft account becomes a collection account, any overdraft disbursements can only be made through your designated account.
Cash Credit Accounts Remain Unrestricted
The new rules do not place restrictions on Cash Credit (CC) accounts. Banks can continue providing cash credit facilities as per customer needs, recognizing that CC accounts are working capital facilities linked to current assets and operationally different from current accounts.
Important Exemptions
Certain accounts are exempt from these restrictions:
FEMA-Related Accounts
Accounts opened under the Foreign Exchange Management Act, 1999, and related notifications remain unrestricted.
Statutory and Regulatory Accounts
Accounts required by statute or specific instructions from financial regulators (RBI, SEBI, IRDAI, PFRDA) or government authorities are exempt.
Regulated Entity Accounts
Accounts of entities regulated by financial sector regulators, used for carrying out their regulated activities, are exempt.
Important note: Even for exempt accounts, surplus funds must be remitted to designated accounts, and banks must ensure transactions serve only permitted purposes.
Product-Specific Current Accounts
Banks can maintain current accounts for specific products or services that inherently require transaction routing, even if they don’t meet the 10% exposure criteria. However, strict conditions apply:
- Must be approved by the bank’s Board with detailed justification
- Limited to specified purposes only
- No cash transactions, customer-discretionary debits, or issuance of cards/cheque books
- Surplus funds must be remitted to designated accounts
- Strong safeguards against misuse required
Prohibited Activities
The new rules explicitly prohibit certain activities:
No Third-Party Pass-Through Transactions
Accounts cannot be used as channels for third-party transactions, except for entities specifically licensed by financial regulators to facilitate such transactions.
No Unauthorized Deposit-Taking
Accountholders not licensed by RBI cannot accept deposits or provide payment services through their accounts.
Account Usage Restrictions
Banks must ensure accounts are used only for authorized business activities related to the accountholder’s actual business operations.
Compliance and Monitoring Requirements
For Banks
Regular monitoring: Banks must monitor accounts at least once every six months to ensure ongoing compliance.
CBS flagging: All accounts under these rules must be appropriately flagged in the core banking solution for clear identification and effective monitoring.
Borrower-level monitoring: For customers with multiple accounts, banks must monitor at both account and borrower levels.
Transaction monitoring systems: Robust systems must detect prohibited usage, including unusually high transaction volumes, frequent pass-through activities, or inconsistencies with stated business activities.
When Eligibility Changes
If a bank becomes ineligible to maintain a current or overdraft account due to:
- Increase in customer’s banking system exposure beyond ₹10 crore
- Changes in the bank’s exposure share
- Non-availability of NOC from lending banks
The bank must:
- Notify the customer within one month of observing ineligibility
- Complete account conversion to collection account or closure within three months
Best Practices for Term Loans
The RBI recommends that term loans be remitted directly to the intended beneficiary’s accounts or for specified end-use, rather than routing through the borrower’s account, where the beneficiary is identifiable.
Implementation Timeline
Effective date: April 1, 2026
Early adoption: Banks may choose to implement these amendments earlier than the mandated date.
What Businesses Should Do Now
Assess Your Exposure
Calculate your total banking system exposure across all lenders to determine if you fall above or below the ₹10 crore threshold.
Review Bank Relationships
Identify which of your banking partners meet the 10% exposure criteria for maintaining current and overdraft accounts.
Plan for Collection Accounts
If you have accounts with banks that won’t meet eligibility criteria, prepare to designate your main transaction account and understand the two-day remittance requirement.
Update Loan Agreements
Work with your lenders to include any additional covenants they may require under their policies.
Review Third-Party Transactions
Ensure your accounts are not being used for unauthorized third-party pass-through transactions that could violate the new rules.
Communicate with Banks
Proactively discuss these changes with your relationship managers to ensure smooth transition.
Impact on Business Operations
For most businesses below the ₹10 crore exposure threshold, these changes will have minimal impact. However, larger businesses with multiple banking relationships will need to:
- Consolidate transaction accounts with eligible banks
- Manage collection accounts with two-day transfer timelines
- Ensure compliance with the new restrictions on third-party transactions
- Adapt to potential changes in banking relationships as exposure shares fluctuate
Conclusion
The RBI’s new framework for current accounts and overdraft facilities aims to strengthen credit discipline and improve monitoring of fund utilization. While businesses with lower banking system exposure face no new restrictions, those with ₹10 crore or more in exposure will need to carefully navigate the eligibility criteria and collection account requirements.
The six-month implementation window until April 2026 provides businesses adequate time to assess their situations, work with banks on compliance, and make necessary adjustments to their banking arrangements.
Stay in close communication with your banking partners as they prepare to implement these changes and consider seeking professional advice if your business has complex banking relationships that may be affected.
Reference: RBI (Commercial Banks Credit Risk Management) Amendment Directions, 2025 dated 11 December 2025