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Tamilnad Mercantile Bank - Head Office

Circular No: TMB.00918/2018-19 Dep. Circular No: HO.GM.KYC.GEN.0031/2018-19 Date: 05/03/2019

Addressee(s): All Branches / Offices Issuing Office: Head Office

Instruction Type: Internal Issuing Department: KYC/AML

References

Previous Instructions HO.CGM.PLN.GEN.17.Cir.960/2015 - 16 HO.GM.OSD.GEN.0099/2018-19 HO.GM.PLN.GEN.0035/2018-19

Instruction Summary

Opening of Current Account for Borrowers of other Banks - Need for Discipline

In continuation of our circulars referred above, we invite the attention of the branches/offices to follow the systems
and procedures scrupulously while opening current accounts of entities which enjoy credit facility from banking
system.

To strengthen the regulatory mechanism on opening current accounts for borrowers of other banks, 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 on their borrowers' credit
exposures including Special Mention Accounts (SMA 0,1 & 2) having aggregate fund based and non fund based
exposure of Rs.5.00 crore and above.

RBI has advised the banks to make use of the information available in CRILC for the prospective customer with credit
exposure of Rs.5.00 crore and above and exercise due diligence for obtaining NOC from the lending banks to prevent
diversion of funds by borrowers through current account with other banks with an aim to improve lending discipline for
reduction in NPA level in banks.

As per RBI instruction, banks can open current accounts of prospective customers who are enjoying credit facilities
(fund based and/or non fund based) from the banking system only after obtaining NOC from the lending banks.

Despite our repeated instructions, of late, we come across instances where a few branches are opening current
account of entities which enjoy the credit facilities (fund based and / or non fund based ) in the banking system without
specifically obtaining a No Objection Certificate (NOC) from the lending banks. In this regard, RBI has cautioned the
banks that appropriate penal action will be initiated on banks in case of non compliance.

At present, CPCs are allowed to open current accounts for linked branches in our bank. As suggested by IBA in line
with RBI instruction, the following guidelines to be followed by the Branches/CPCs scrupulously without fail.

1. Prior to opening a current account, Branches/CPCs should ascertain through Central Repository of Information
on Large Credit (CRILC) whether the customer Is availing credit facility from any bank and ensure NIL CRILC
report which must be kept with the respective account opening form.

2. In case, CRILC discloses the details of credit limits enjoyed by the customers with other bank(s), the CPCs
should not open new current account to the same customer , if the account is SMA status or NPA status.

3. When the status of the account is Standard , the CPCs shall open the account only after getting NOC (to be
obtained by the concerned branch) from the lending banks.

4. If such NOC/ permission is not received from the lending bank within 15 days from the date of request, the
CPCs may open the current account without waiting further for NOC/permission and thereafter advise the
lending bank.

5. At any point of time after opening of the account , if the lending bank objects to the same, especially indicating
irregularity in accounts, the account holding branch should take necessary steps without delay to close such

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account after issuing 30 days notice to the account holder and remit the closure proceeds to the lending
bank.

Please note that CRILC verification process is a part of customary due diligence process. But, under any
circumstances, a genuine prospective customer should not be inconvenienced and delayed in opening the current
account on the pretext of CRILC verification.

Direction to branches/CPCs:

Branches/CPCs are instructed to adhere the above guidelines scrupulously so as to comply the RBI direction in letter
and spirit.

The Circular should be brought to the notice of all the Officers / Staff Members and their signature should be obtained
in a copy of the circular, as a token of having read the contents.

For any clarifications in this regard, branches/CPCs may feel free to contact our KYC/AML Cell, Head Office,
Thoothukudi.

S. SENTHIL ANANDAN
GENERAL MANAGER

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