What changed
RBI revised the agency commission structure for 'Other payments' from a flat Rs. 50 per transaction to 9 paise per Rs. 100 turnover, effective July 1, 2005. The rates for receipts (Rs. 45 per transaction) and pension payments (Rs. 60 per transaction) remain unchanged. This change was prompted by representations from agency banks that the earlier rates did not adequately compensate them, especially for high-value government payments that leave banks out of funds for several days.
What it means for you
For banks handling government business, the new turnover-based commission for 'Other payments' could increase compensation for high-value transactions, addressing the cash flow gap issue. However, for low-value payments, the per-transaction rate might have been more beneficial. Banks need to reassess their cost structures for government business, particularly for large-value payments, as the new rate aligns better with the actual turnover handled.
What you must do
- Update your systems to calculate agency commission for 'Other payments' at 9 paise per Rs. 100 turnover, effective July 1, 2005.
- Review your bank's transaction data to estimate the financial impact of the shift from flat fee to turnover-based commission.
- Ensure all branches handling government business are informed of the revised rates and the effective date.
- Acknowledge receipt of the circular to RBI as required.
Who it affects
State Bank of India and its associates, All nationalised banks, IDBI Ltd., HDFC Bank Ltd., ICICI Bank Ltd., UTI Bank Ltd., Jammu & Kashmir Bank Ltd.
When does the revised rate take effect?
The revised rate is effective from July 1, 2005, as per the circular dated May 8, 2006.