Government Agency Business Arrangement – Appointment of Indian Private Sector Banks as Agency Banks of Reserve Bank of India (RBI)

 A long standing demand of Private Banks today has been cleared by Reserve Bank of India. Private Sector Banks were interested for a piece of action of Government Agency Business.


With RBI Notification No, RBI/2011-2012/377 DGBA.GAD.No.H – 5029/42.01.033/2011-12 dt. January 31, 2012, the gates have been opened to all Private Sector Banks.


The complete notification can be read @ RBI GBA


The notification comes into immediate effect, hence the Private sector banks and the IT Companies can commence their acquisition plans.


The top 5 highlights of the Notification are:-

  1. All private sector banks will be eligible to handle any Central/State Government business, where RBI pays agency banks, at par with public sector banks.

  2. To handle central government business, the respective banks have to be appointed as agents of RBI. The concerned Civil / Non-Civil Ministry / Department, will build the proposal and forward to Controller General of Accounts (CGA) CGA for examination. The CGA after examnining the proposal, forward with his/her recommendation he Reserve Bank of India, Department of Government and Bank Accounts, Central Office, Mumbai (DGBA, CO). The final decision will be taken by RBI, DGBA, CO.

  3. To handle state government business, the Department of the State has to work out the arrangement and approach the Finance Department of the State. The Finance Department will recommend the proposal to the Regional Director of RBI for the State, who will forward the case with his comments to the DGBA, CO for approval and further action.

  4. For fresh/additional business, an agency bank will be required to obtain approval from DGBA, CO, as at present. Once RBI authorizes a bank for any Government business, its subsequent approval with regard to mode (Physical or e-Mode) and area of operation is not required and the same will be decided by the office of CGA (for Central Government) or the Finance Department of the State Government. It is enough the information is forwarded to RBI.

  5. Further, a Central Government Ministry/Department (in consultation with CGA) and a State Government Department (in consultation with the respective AG’s Office) may engage any bank for implementation of any of the prefunded schemes without reference to RBI, as such schemes do not fall under the purview of Government agency business arrangement and hence do not qualify for payment of agency commission by RBI.

Why are private sector banks interested in Government Agency Business?

a) The commission. At present the commission is as under: –

The rates of agency commission applicable at present (from 1.7.2005) are as under:




Rs. 45 per transaction


Pension Payments


Rs. 60 per transaction


Payments other than pension 


9 Paise per Rs.100/- turnover

b) The float income on the funds in the government accounts.

The prestige associated with government accounts.

What business can agency banks take on behalf of Central Government and State Governments?

The following are the indicative list.

  1. Collection of Direct Taxes on behalf of Central Board of Direct Taxes (CBDT) CBDT

  2. Collection of Indirect Taxes on behalf of Central Board of Excise & Customs (CBEC) CBEC

  3. Disbursement of Central Government Pensions Pension

  4. Expenditure-related Payments of Central Govt. Ministries or Departments

  5. State Govt. Business including Collection of State Taxes based on the recommendation of individual States. OLTAS

The icing on the cake is the boost to ePayments, as GePG ((Government ePayment Gateway) will be the main pathway for Government payouts. GEPG

The full benefits of GePG (Government ePayment Gateway) will be leveraged by the new players and as GePG is already rolled-out, much time and amount need be spent on IT integration.


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