Free Remittance for Govt Transactions: RBI Circular (2007)
Current · Source: Reserve Bank of India · RBI/2007-08/123 · issued 28 Aug 2007 · ~2 min read
Quick answerRBI has reiterated that agency banks must provide free remittance services to accredited Central and State Government departments, regardless of the mode (ECS, EFT, NEFT, RTGS). Banks cannot levy any charges for these transactions.
The rule, in the simplest words
Agency banks must provide free remittance services to government departments
No charges are allowed for government transactions, regardless of the mode (like ECS, EFT, NEFT, RTGS)
Banks must absorb the cost of processing these remittances and cannot levy any fees
This rule applies to all electronic channels and all government transactions
How it plays out — a real example
A government transactions officer in Mumbai will no longer charge fees to the state government for transferring funds via NEFT, as per the RBI's directive to provide free remittance services. This means the officer will process these transactions without adding any service charges, ensuring compliance with the RBI's rules. The officer's bank will absorb the costs, providing a free service to the government department.
What changed
RBI observed that most agency banks were charging service fees for government remittances via electronic modes like ECS, EFT, NEFT, and RTGS. The circular reiterates that such transactions are part of agency services and must be free of cost, as RBI itself does not charge banks for these facilities.
What it means for you
Banks accredited as agency banks for government departments must absorb the cost of processing remittances through all electronic channels. This eliminates a potential revenue stream from government clients and reinforces the zero-charge principle for government transactions. Banks need to ensure their systems and branches comply to avoid regulatory action.
What you must do
Review all current charges applied to government remittance transactions via ECS, EFT, NEFT, and RTGS and ensure they are removed immediately.
Communicate this directive to all authorised branches handling government accounts to stop levying any fees.
Update internal policies and system configurations to flag and prevent any future charges on government remittances.
Train branch staff on the free-of-cost requirement for all modes of government remittances.
Who it affects
All agency banks accredited to Central and State Government departments, Authorised branches of agency banks handling government transactions
❓ Common questions
Does this circular apply to all types of government remittances?
Yes, it applies to all remittance transactions by accredited banks for Central and State Government departments, irrespective of the mode—whether ECS, EFT, NEFT, RTGS, or any other electronic method.
Why did RBI issue this reminder?
RBI found that most agency banks were charging service fees for electronic government remittances, contrary to existing instructions. This circular reiterates the free-of-cost requirement and clarifies that RBI itself does not charge banks for these services.
What should banks do if they have already charged fees for such transactions?
The circular does not address refunds; banks should immediately stop levying any charges and ensure compliance with the free-of-cost requirement.
📜 Read the original circular — full text as issued by RBI
RBI/2007-08/123
DGBA.GAD.No.H 2206 /31.03.011/2007-08
August
28, 2007
To
The
Chairman & Managing Director/ Managing Director
All
Agency banks
Dear
Sir,
Remittance
facility for Government transactions
As
per extant instructions, the remittance needs of the Government Departments are
to be met by the concerned accredited agency bank free of cost. However, information
collected from banks reveal that service charges are being levied by most of the
agency banks for effecting remittance transactions of Government through ECS,
EFT, NEFT, RTGS etc. In this connection, we reiterate that remittance transactions
by accredited banks by whatever mode form part of agency transactions and has
to be effected free of charge. Further, RBI has not been charging any fee from
banks for ECS/EFT/NEFT and RTGS transactions.
2.
It is, therefore, advised that all agency banks should provide remittance facility
to Ministries/ Departments of Central and State Governments to which they are
accredited free of cost at their authorised branches, irrespective of the
mode of such remittance.
Yours
faithfully
(M.T.Varghese)
General
Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2007-08/123 · issued 28 Aug 2007. The plain-English explanation above is BankPulse’s own independent summary.
Communicate this directive to all authorised branches handling government accounts to stop levying any fees.
Train branch staff on the free-of-cost requirement for all modes of government remittances.
💻 IT / Systems
Update internal policies and system configurations to flag and prevent any future charges on government remittances.
📜 Compliance
Review all current charges applied to government remittance transactions via ECS, EFT, NEFT, and RTGS and ensure they are removed immediately.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Compliance officer at a bank this circular applies to (All agency banks accredited to Central and State Government departments, Authorised branches of agency banks handling government transactions), your first concrete step on “Free Remittance for Govt Transactions: RBI Circular (2007)” is: “Review all current charges applied to government remittance transactions via ECS, EFT, NEFT, and RTGS and ensure they are removed immediately.” (RBI issued this 28 Aug 2007).
Action required: Review all current charges applied to government remittance transactions via ECS, EFT, NEFT, and RTGS and ensure they are removed immediately.
Action required: Communicate this directive to all authorised branches handling government accounts to stop levying any fees.
Action required: Update internal policies and system configurations to flag and prevent any future charges on government remittances.
Action required: Train branch staff on the free-of-cost requirement for all modes of government remittances.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=3787&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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