In an August 2020 circular, RBI had directed banks not to open current accounts for customers who have availed credit facilities in the form of Cash Credit (CC) / Overdraft (OD) from the banking system.
on a review, Central bank In December last year, banks were allowed to open specific accounts as prescribed under various laws and directions of other regulators/ regulatory departments without any restrictions in terms of the August 2020 circular.
“Based on the requests received by the Authority, in order to avoid the difficulties, if any, faced by the insurers in maintaining current accounts with the banks, it is clarified that the insurers concerned will not allow the banks for the purpose of premium. Can maintain appropriate number of Current Accounts for collection, management expenses, policy payments, investment operations etc. for the convenience of policyholders and ease of doing business.
Insurers maintain separate current accounts with banks at different operational levels (branch office, controlling office, corporate office) for various purposes, including premium collection, management expenses, policy payments, investment operations.
IRDA said that the maintenance of current accounts at various operational levels for specific purposes helps insurers in managing funds, resolving transactions and meeting the claims of policyholders efficiently.
The regulator also said that the audit committee of insurance companies will annually review the need for multiple current accounts and rationalization, if any, if required.