Insurance regulator Irdai on Wednesday said insurers can maintain current accounts in an appropriate number of banks for premium collection and policy payments for the convenience of policyholders and ease of doing business.
Insurance Regulatory and Development Authority of India (Irdai) has issued the clarification in the backdrop of the RBI's circular on Opening of Current Accounts by Banks Need for Discipline.
In the August 2020 circular, the RBI had instructed banks not to open current accounts for customers who have availed of credit facilities in the form of cash credit (CC) / overdraft (OD) from the banking system.
On a review, the central bank in December last year permitted banks to open specific accounts that are stipulated under various statutes and instructions of other regulators/ regulatory departments, without any restrictions placed in terms of the August 2020 circular.
"Based on the requests received by the Authority, to avoid hardships, if any, faced by the insurers in maintaining current accounts with banks, it is clarified that the respective insurers may maintain current accounts in an appropriate number of banks for the purpose of premium collection, management expenses, policy payments, investment operations, etc., for the convenience of the policyholders and for the ease of doing business," Irdai said.
Insurers maintain separate current accounts with banks at different operational levels (Branch offices, Controlling offices, Corporate office) for different purposes, including, premium collection, management expenses, policy payments, investment operations.
Maintenance of current accounts at different operational levels for specific purposes helps the insurers in managing funds, reconciliation of transactions and servicing claims of policyholders efficiently, Irdai said.
The regulator also said the audit committee of the insurers shall review annually the need for having multiple current accounts and rationalisation, if any, as may be required.