Government Business Agency Norms Amended by RBI for Private Sector Banks
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The Reserve Bank of India amends the existing guidelines “Appointment of Scheduled Private Sector Banks as Agency Banks of RBI” for authorising the allocation of government (Central or State) business to private sector banks. In connection with the recent development where the Department of Financial Services (DFS), Ministry of Finance (MoF), in February 2021, has lifted the official ban that was put in place on the allocation of government business to private sector banks.

The private banks not handling any government agency business may be appointed as RBI agents upon executing an agreement with the RBI. However, as per RBI notification, the concerned bank should not be under the moratorium or Prompt Corrective Action (PCA) framework of the RBI while applying or signing the agreement with RBI. 

Further, the scheduled private sector banks who already have agency banking agreement and are authorised to do government agency business for Central or State Government can continue with the same agency business without taking the RBI approval.

The government transactions that are eligible for agency commission include pension payments and receipts in respect of Central/State governments, Revenue receipts and payments on behalf of Central/State government or any other work specified by RBI to be eligible for agency commission.

It is also said that once the bank receives authorisation from RBI, it is not required to take separate approval concerning mode (physical or e-mode) and area of operations from RBI. It will be decided by the O/o CGA (for Central Government) or the Finance Department of the State Government, keeping RBI informed in the matter.

In consultation with RBI, the government may review the performance of the agency banks from time to time on the permission granted. It may potentially withdraw the permission and discontinue the bank from the agency business. 

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