The intention is to ensure that banks, which give loans have an idea of the cash flows of the company. RBI has also directed lending banks to not use current accounts to route loans. Instead, since term loans are for specific purposes, banks must directly debit the funds to suppliers of goods and services to the borrower.
The intention clearly is to prevent siphoning of funds by borrowers. Thus far, many borrowers take loans from public sector banks but use foreign and private banks for their daily operational current accounts, ostensibly because these banks offer good cash management services and products.
Foreign and private banks usually don't lend much to mid-sized corporates. But all banks like current accounts because they are a cheap source of funds.
The banking regulator introduced new rules ... could u explain this from the second article 5th para
The intention is to ensure that banks, which give loans have an idea of the cash flows of the company. RBI has also directed lending banks to not use current accounts to route loans. Instead, since term loans are for specific purposes, banks must directly debit the funds to suppliers of goods and services to the borrower.
The intention clearly is to prevent siphoning of funds by borrowers. Thus far, many borrowers take loans from public sector banks but use foreign and private banks for their daily operational current accounts, ostensibly because these banks offer good cash management services and products.
Foreign and private banks usually don't lend much to mid-sized corporates. But all banks like current accounts because they are a cheap source of funds.
Control siphoning of funds by regulating an already over regulated sector??
third paragraph in the second article