NOC from Financer is required for opening current Account: RBI

Please refer to our cir­cu­lar DBOD.No.Leg.BC.84/09.07.005/2003–04 dat­ed May 15, 2004 advis­ing banks to scrupu­lous­ly ensure that their branch­es do not open cur­rent accounts of enti­ties which enjoy cred­it facil­i­ties (fund based or non-fund based) from the bank­ing sys­tem with­out specif­i­cal­ly obtain­ing a No-Objec­tion Cer­tifi­cate (NOC) from the lend­ing bank(s). Fur­ther, vide cir­cu­lar DBOD.No.Leg.BC.22/09.07.005/2004–2005 dat­ed August 4, 2004, banks may open cur­rent accounts of prospec­tive cus­tomers in case no response is received from the exist­ing bankers after a min­i­mum wait­ing peri­od of a fort­night. How­ev­er, we have been receiv­ing com­plaints against banks for open­ing cur­rent account with­out fol­low­ing due dili­gence as spec­i­fied in our afore­said circulars.

2. In this con­nec­tion, atten­tion is invit­ed to RBI Guide­lines on “Ear­ly Recog­ni­tion of Finan­cial Dis­tress, Prompt Steps for Res­o­lu­tion and Fair Recov­ery for Lenders: Frame­work for Revi­tal­is­ing Dis­tressed Assets in the Econ­o­my” issued on Jan­u­ary 30, 2014. In terms of these guide­lines, RBI has set up a Cen­tral Repos­i­to­ry of Infor­ma­tion on Large Cred­its (CRILC) to col­lect, store, and dis­sem­i­nate data on all bor­row­ers’ cred­it expo­sures. Banks / Finan­cial Insti­tu­tions are required to report infor­ma­tion to CRILC as advised vide cir­cu­lar DBS.OSMOS.No.14703/33.01.001/2013–14 dat­ed May 22, 2014.

3. Keep­ing in view the impor­tance of cred­it dis­ci­pline, espe­cial­ly for reduc­tion in NPA lev­el in banks, banks are advised to make use of the infor­ma­tion avail­able in CRILC and not lim­it their due dili­gence to seek­ing NOC from the bank with whom the cus­tomer is sup­posed to be enjoy­ing the cred­it facil­i­ties as per his dec­la­ra­tion. Banks should ver­i­fy from the data avail­able in CRILC data­base whether the cus­tomer is avail­ing of cred­it facil­i­ty from anoth­er bank. Fur­ther banks may also seek ‘No Objec­tion Cer­tifi­cate’ from the drawee bank where the ini­tial deposit to cur­rent account is made by way of a cheque.

4. As these instruc­tions are aimed at improv­ing cred­it dis­ci­pline, appro­pri­ate penal action will be tak­en in case of non-compliance.

RBI/2015–16/112
DBR.Leg.BC.25./09.07.005/2015–16

July 02, 2015