Scheduled payments banks and scheduled small finance banks will be eligible to conduct Government agency business, according to the Reserve Bank of India (RBI).

The central bank has decided in this regard in consultation with the Department of Financial Services (DFS), Ministry of Finance (MoF).

Any payment bank or small finance bank that intends to undertake Government agency business may be appointed as an agent of RBI upon execution of an agreement with RBI, provided that the overarching regulatory framework prescribed for these banks is complied with.

This move comes in the wake of the embargo put in place from September 2012 by DFS on the further allocation of Government business to private sector banks being been lifted in February 2021.

In May 2021, RBI said that scheduled private sector banks, not having agency banking agreement with RBI, but intending to handle Government agency business, may be appointed as agents of RBI upon execution of an agreement with RBI.

This will be subject to the condition that the concerned bank is not under the Prompt Corrective Action (PCA) framework or moratorium when making the application or signing of the agreement with RBI.

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 can discontinue the arrangement after giving notice to the concerned agency banks, keeping RBI informed.

Related Topics