What changed
RBI revised and updated the Master Circular on Conduct of Government Business by Agency Banks - Payment of Agency Commission, replacing the 2021 version. The new circular consolidates all instructions issued up to March 31, 2022, into a single document. Key updates include clarifications on stamp duty collection and exclusion of banks' own tax liabilities from commission claims.
What it means for you
Agency banks must align their government business operations with the updated circular to ensure accurate commission claims. The clarification on stamp duty ensures banks do not double-dip by collecting charges from the public or receiving state government remuneration. Banks must also segregate their own tax payments to avoid ineligible commission claims, which could lead to compliance issues.
What you must do
- Review the updated Master Circular and ensure all branches handling government business are aware of the changes.
- Implement processes to exclude own tax liabilities (TDS, Corporation Tax) from agency commission claims and furnish required certificates.
- Verify stamp duty collection procedures to ensure eligibility for commission only when no charges are collected from the public or state government.
- Update internal systems to reflect the consolidated instructions and train staff on the revised eligibility criteria.
Who it affects
All agency banks appointed under Section 45 of the RBI Act, 1934, Branches handling government revenue receipts, payments, and pension disbursements, Banks involved in Small Savings Schemes and stamp duty collection
Are state government borrowings from financial institutions eligible for agency commission?
No, short-term or long-term borrowings of state governments raised directly from financial institutions and banks are not eligible for agency commission, as they are not considered general banking business.
Can an agency bank claim commission for collecting stamp duty as a Franking Vendor?
No, if the bank is engaged as a Franking Vendor by the state government and collects stamp duty from the public for franking, it is not eligible for agency commission since the state government pays it separately. However, collecting stamp duty via challan from the Franking Vendor for treasury credit is eligible.
What happens if an agency bank pays its own tax liabilities through its branches?
Such transactions must be indicated separately in the scroll and are not eligible for agency commission. Banks must provide a certificate confirming exclusion of own tax liabilities from commission claims.