What changed
RBI issued a Master Circular updating and consolidating all prior instructions on broker appointment, delisting, and brokerage for Relief/Savings Bonds as of June 30, 2010. It reiterates that agency banks are solely responsible for sub-agents' activities and must not allow them to use RBI's name. Brokerage claims must be settled within 30 days, and banks should pay brokers monthly via ECS where possible.
What it means for you
Agency banks must streamline broker registration with a simple procedure and ensure dormant brokers (no business for 2 years) are delisted after notice. The 1% brokerage rate remains unchanged, but banks must pay it within 30 days and seek reimbursement from RBI only after settlement. No TDS applies on brokerage payments under Section 194(H) of the Income Tax Act.
What you must do
- Adopt a simple enrollment process for brokers, allotting a unique broker code for all applications.
- Ensure sub-agents do not use RBI's name in publicity; hold the appointing bank solely responsible for their actions.
- Delist brokers with no fresh business for 2 years after giving due notice.
- Pay brokerage at 1% per Rs.100 within 30 days of subscription, and settle claims before seeking RBI reimbursement.
- Consider monthly brokerage payments via ECS to agents upon obtaining their mandate.
Who it affects
State Bank of India and associate banks, 17 nationalized banks, Axis Bank, ICICI Bank, IDBI Bank, HDFC Bank, Stock Holding Corporation of India Ltd, All agency banks handling Relief/Savings Bonds
What is the brokerage rate for Relief/Savings Bonds under this circular?
Brokerage is payable at Re. 1 per Rs. 100 (i.e., 1%) on applications tendered by registered brokers for investment in bonds in BLA form at designated branches.
Is TDS applicable on brokerage payments for Savings Bonds?
No, agency banks are not required to deduct tax at source on brokerage payments for Savings Bonds business, as per Section 194(H) of the Income Tax Act, 1961.
What should banks do if a broker has been inactive for a long period?
Banks should delist dormant brokers who have not generated any fresh business for a period of 2 years, after giving them due notice.