What changed
The RBI circular dated December 15, 2021 extends eligibility for government agency business to scheduled payments banks and scheduled small finance banks, subject to compliance with the conditions in the May 10, 2021 circular and execution of an agreement with RBI.
What it means for you
This opens a new revenue stream for payments banks and small finance banks through government business fees. It also increases competition in government transaction handling, potentially improving service reach in underserved areas. Banks must ensure full compliance with existing regulatory frameworks to qualify.
What you must do
- Review the May 10, 2021 circular for detailed conditions on government agency business.
- Assess your bank's readiness to comply with the overarching regulatory framework.
- Initiate the agreement process with RBI if you intend to undertake government agency business.
- Train staff on government transaction handling and reporting requirements.
Who it affects
Scheduled Payments Banks, Scheduled Small Finance Banks, RBI's agency banking network, Government departments handling cash and tax collections
What is government agency business?
It involves banks acting as agents of RBI to handle government transactions like tax collections, pension payments, and other government receipts and payments.
Do payments banks and small finance banks need a separate agreement with RBI?
Yes, they must execute an agreement with RBI to be appointed as agents, provided they comply with the regulatory framework.
Are there any new conditions beyond the May 2021 circular?
No, the same instructions and conditions from the May 10, 2021 circular apply to these banks as well.