NEW DELHI: The Reserve Bank of India (RBI) on Monday issued revised guidelines for authorising private banks as agency banks of the RBI for the conduct of government business. This move follows the lifting of the embargo put in place in September 2012 by the Department of Financial Services (DFS), Ministry of Finance (MoF), on the further allocation of government business to private sector banks.
According to the modified norms, private sector banks intending to handle government agency business as agency banks can do so upon execution of an agreement with the central bank. This, however, will be subject to the condition that the concerned bank is not under the Prompt Corrective Action (PCA) framework or a moratorium at the time of making an application or signing the agreement.
“The choice of accrediting an agency bank (including scheduled private sector agency banks) for any particular government agency business rests solely with the concerned central government departments /state governments,” the RBI notification said.
Existing private sector agency banks with whom the RBI already has an agreement and who are authorised to do government agency business may continue to do these businesses without taking any fresh approval from the central bank, the notification added.
The central bank said that the performance of the agency banks, which will be made based on a matrix of various government initiatives and schemes, may be reviewed from time-to-time by the government in consultation with the central bank. The permission extended to the bank to undertake government business could be potentially withdrawn based on such reviews.
The notification also said that once the RBI authorises a bank for any government business, a separate approval from the central bank with regards to the mode (physical or e-mode) and area of operations is not required and the same will be decided by the Controller General of Accounts (for Central Government) or the Finance Department of the State Government, keeping the central bank informed in the matter.