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Scheduled private sector banks (PvSBs) intending to handle government agency business as agency banks of the Reserve Bank of India (RBI) can do so upon execution of an agreement with the latter.
This will be subject to the condition that the concerned bank is not under Prompt Corrective Action (PCA) framework or moratorium at the time of making the application or signing of the agreement with RBI.
Revised guidelines
The central bank on Monday issued “revised guidelines/ framework for authorising Scheduled PvSBs as agency banks of RBI for conduct of government business attracting agency commission” following lifting of the embargo put in place from September 2012 by Department of Financial Services (DFS), Ministry of Finance (MoF) on further allocation of Government business to private sector banks.
RBI said the performance of the agency banks, on a matrix of various government initiatives and Schemes, may be reviewed from time-to-time by the government in consultation with RBI based on which the permission given to the concerned bank to undertake government business could be potentially withdrawn.
Eligible transactions
Among the transactions relating to government business undertaken by agency banks that are eligible for agency commission are: revenue receipts and payments on behalf of the Central/State Government; pension payments in respect of Central / State Governments; Special Deposit Scheme (SDS) 1975.
The other transactions that are eligible for agency commission are: Public Provident Fund (PPF) Scheme, 1968; Senior Citizen Savings Scheme (SCSS), 2004; Kisan Vikas Patra, 2014 and Sukanya Samriddhi Account; and any other item of work specifically advised by Reserve Bank as eligible for agency commission (that is Relief Bonds/ Savings Bonds etc. transactions) .
The choice of accrediting an agency bank (including scheduled private sector agency bank) for any particular government agency business rests solely with the concerned Central Government Departments /State Governments.
Further, Government Departments/ State Governments have the option to discontinue the arrangement after giving notice to the concerned agency banks, keeping RBI informed.
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