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
