Appointment of India Post Payments Bank (IPPB) and Equitas Small Finance Bank(ESFB) as agency banks under Section 45 of the Reserve Bank of India (RBI) Act 1934 - Postalstudy | Post Office Blog | Materials for | Exams

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Appointment of India Post Payments Bank (IPPB) and Equitas Small Finance Bank(ESFB) as agency banks under Section 45 of the Reserve Bank of India (RBI) Act 1934

Appointment  of India Post Payments Bank and Equitas Small Finance Bank as agency banks under Section 45 of the Reserve Bank of India Act 1934

RESERVE BANK OF INDIA www.rbi.org.in CO.DGBA.GBD.No 5829/42.01.033/2021-22 October 13,  2021


The Secretary

Department of Financial services Ministry of Finance, Government of India 3^ floor, Jeevan Deep Building Sansad Marg

New Delhi — 110 001 Dear Sir

Appointment  of India Post Payments Bank and Equitas Small Finance Bank as aqencv banks under Section 45 of the Reserve Bank of India Act 1934


Please refer to letter no. F.No.8/4/2020-BO.II dated August 3, 2021 from your good office on the captioned subject along with letter no. F.No.8-6/2019/-PBI dated August 9, 2021 from Department of Posts, Ministry of Communication and our letter no. CO.DGBA.GBD.No.S477/42.01.033/2021- 22 August 17, 2021 on the captioned subject.

2.  In this regard we inform that we have examined the proposal of your good office for including all Scheduled Commercial Banks as agency banks of RBI for doing government business which attracts agency commission. Accordingly we inform that:

(i) Small Finance Banks and Payment Banks may be appointed as agency banks of RBI for doing government  business  provided  that the overarching  regulatory  framework  prescribed  for these banks is complied  with. However,  these banks may  ensure  that they  have all the required IT infrastructure in place at the time of application to RBI for agency banking so that no issues are observed  during  integration  of  their  systems  with  the  systems  of  RBI  for  timely  reporting  of Government transactions. Accordingly,  we will examine the proposal from these banks as when the same are received by us.

(ii) Taking into account of the IT constraints at RRBs, it will not be feasible to appoint RRBs as agency  banks  of RBI for  doing Government  business.  However,  considering  the fact that  the RRBs are owned by the central government, state government, and the sponsoring bank, allowing these banks to do government business attracting agency commission will help the Government in meeting its objectives  as mentioned the letter dated August 9, 2021.   Therefore,  it has been decided that these RRBs will also be considered for undertaking Central and state Government Business  (for  the  State  Concerned)  attracting  agency  commission  only  through  their  sponsor banks (which are already  agency banks of RBI). However,  in such cases RRBs will ensure that the timeline for receipts and payments of Government are strictly adhered to. Further it will be the responsibility of the sponsor  banks for compliances  of all government  and RBI instructions  and guidelines by their RRBs and Government and RBI will be communicating with the sponsor banks only.  Moreover,  it  will  be  upto  the  sponsor  bank  whether  to  or  not  to 

 

allow  its  RRB/s  to  do government business attracting agency commission subject to having the required internal Board approval or from Government/other concerned RBI Departments as the case may be. As RBI will not  be  authorising  any  RRB  as  its  agency  bank  and  thus  will  not  be  paying  any  agency commission  directly to the RRBs for Government  transactions done by them.   Similarly,  in case of imposing penalties,  the current  account of the sponsor agency banks only will be debited,  in case the need arises. It is upto the sponsor bank to decide how the agency commission paid to the sponsor  bank by RBI is distributed to the RRBs and how the penalty  is recovered from the RRBs by them. This arrangement will be put in place only for the RRBs through their respective sponsor banks.


(iii) Foreign banks will continue not to be appointed as agency banks of RBI for doing government business.


3.  The  agency  banks  will  be  required  to  adhere  to  additional  criteria,  if  any  prescribed  by Government  (Both Central and State Governments)  and RBI from time to time as done hitherto.

4. Your good office is requested to confirm the arrangements  so that we can issue the required guidelines to the Scheduled Commercial Banks on the above lines and accordingly attend to the proposals which we will receive from them for their appointment as agency banks.

5. We reiterate that for banking arrangements under Central Government Scheme, and other pre- funded  Government  transactions  (including  DBT)  which  doesn't  attract  agency  commission, Government can appoint any commercial bank, which may not necessarily be an agency bank.

Yours faithfully


(R. Kamalakannan) Chief General Manager




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