What changed
The embargo imposed by DFS in September 2012 on allocating government business to private sector banks was lifted on February 24, 2021. RBI has revised guidelines to allow scheduled private sector banks to be appointed as agency banks for government business, subject to conditions.
What it means for you
Private sector banks can now expand into government agency business, increasing competition and revenue opportunities. Banks under PCA or moratorium are excluded. The choice of accrediting an agency bank rests with government departments, giving them flexibility.
What you must do
- Existing private sector agency banks: continue current government business without fresh RBI approval; for new business, follow the 2012 circular and get approval from DGBA.
- New private sector banks: apply for agency bank status by executing an agreement with RBI, ensuring you are not under PCA or moratorium.
- Coordinate with O/o CGA for central government business or state finance departments for state business to get accreditation proposals forwarded to RBI.
Who it affects
All scheduled commercial banks in India, Existing private sector agency banks, Private sector banks not yet agency banks, Central and state government departments
Can existing private sector agency banks continue their current government business without any action?
Yes, they can continue without fresh approval. For new or additional government business, they need approval from DGBA as per the 2012 circular.
What disqualifies a private sector bank from becoming an agency bank?
A bank under Prompt Corrective Action (PCA) framework or moratorium at the time of application or signing the agreement with RBI is not eligible.
Who decides which bank gets government business?
The concerned central government department or state government has the sole discretion to accredit an agency bank for their business.