Master Circular on Agency Commission for Government Business

RBI/2024-25/07 CO.DGBA.GBD.No.S2/31-12-010/2024-2025 April 1, 2024 All Agency Banks Madam / Dear Sir Master Circular on Conduct of Government Business by Agency Banks - Payment of Agency Commission Please refer to our Master Circular RBI/2023-24/07, CO.DGBA.GBD.No.S1/31-12-010/2023-2024 dated April 1, 2023 on the above subject. We have now revised and updated the Master Circular which consolidates important instructions on the subject issued by the Reserve Bank of India till March 31, 2024. 2. A copy of the revised Master Circular is enclosed for your information. This Circular may also be downloaded from our website https://mastercirculars.rbi.org.in . Yours faithfully (Indranil Chakraborty) Chief General Manager Encl: As above MASTER CIRCULAR ON AGENCY COMMISSION Introduction 1. The Reserve Bank of India carries out the general banking business of the Central and State Governments through its own offices and through the offices of the agency banks appointed under Section 45 of the RBI Act, 1934, by mutual agreement. RBI pays agency commission to the agency banks for the government business handled by them. This Master Circular consolidates the instructions contained in the circulars listed in Annex 1 . Government transactions eligible for agency commission 2. Transactions relating to the following government business undertaken by agency banks are eligible for agency commission paid by RBI: Revenue receipts and payments on behalf of the Central/State Governments Pension payments in respect of Central / State Governments and Any other item of work specifically advised by Reserve Bank as eligible for agency commission 3. The Agency banks also undertake the work related to Small Savings Schemes (SSS) the commission for which is borne by Government of India. Though the settlement of commission on such SSS is processed by RBI and settled at Central Accounts Section (CAS), Nagpur, the rates of agency commission related to SSS transactions are decided by Government of India. Agency commission claims on Special Deposit Scheme (SDS) related transactions (where mirror accounts are maintained in RBI) are also settled at CAS, Nagpur. 4. Short term/long term borrowings of State Governments raised directly from financial institutions and banks are not eligible for agency commission as these transactions are not considered to be in the nature of general banking business. Reserve Bank pays the agency banks separate remuneration as agreed upon for acting as agents for management of public debt. 5. Whenever agency banks collect stamp duty through physical mode or e-mode (challan based), they are eligible for payment of agency commission, provided the agency banks do not collect any charges from the members of public or receive remuneration from the State Government for doing this work. 6. If the agency bank is engaged by the State Government as Franking Vendor and it collects stamp duty from the public for franking the documents, it will not be eligible for agency commission since the State Government is paying commission to it as Franking Vendor. However, the agency bank which collects the stamp duty paid by the Franking Vendor for credit to the Treasury through challan in physical or e-mode for purchase of the franking bar, would be eligible for agency commission since it is a regular payment of Stamp Duty as stated above. Government transactions not eligible for agency commission 7. Agency banks paying their own tax liabilities through their own branches or through authorised branches of any other agency bank including State Bank of India or offices of Reserve Bank of India wherever they do not have their own authorised direct tax collection branch should indicate the same separately in the scroll. Such transactions will not be eligible for payment of agency commission. Banks should furnish a certificate to the effect that own tax liabilities (TDS, Corporation Tax, etc.) paid by them have been excluded while claiming agency commission. 8. The following activities, inter alia, do not come under the purview of agency bank business and are therefore not eligible for payment of agency commission. Furnishing of bank guarantees/security deposits, etc. through agency banks by government contractors/suppliers, which constitute banking transactions undertaken by banks for their customers. The banking business of autonomous/statutory bodies/Municipalities/ companies/ Corporations/Local Bodies. Payments which have been classified as capital in nature by government to cover losses incurred by autonomous/statutory bodies/ Municipalities/ Corporations/Local Bodies etc. Prefunded schemes which may be implemented by a Central Government Ministry/Department (in consultation with CGA) or a State Government Department through any bank. Transactions related to Gold Monetisation Scheme, 2015 Transactions arising out of Letters of Credit / Bank Guarantee opened by banks on behalf of Ministries/Departments etc. do not qualify for agency commission as RBI only reimburses the paid amount to the banks based on the mandate received from the governments. Any other item of work specifically advised by Reserve Bank or Central or State Government as ineligible for agency commission. 9. Agency Banks are advised to meticulously follow instructions issued by RBI from time to time regarding transactions which are not eligible for agency commission and submit their claims for agency commission accordingly. All agency banks while claiming agency commission should certify that no claim of agency commission is made on ineligible transactions. 10. Reporting of transactions by agency banks to RBI: After the operationalisation of NEFT 24X7 and RTGS 24X7, agency banks authorised to collect Goods and Service Tax (GST) and Direct Taxes under TIN 2.0 channel shall upload their luggage files in RBI’s QPX/e-Kuber on all days except the Global holidays, which are January 26, August 15, October 2, all non-working Saturdays, all Sundays and any other day declared holiday by RBI for Government Transactions due to exigencies. It is to be ensured that these luggage files are uploaded in RBI’s QPX/e-Kuber on or before 1800 hours prescribed by Office of Principal Chief Controller of Accounts, Central Board of Indirect Taxes & Customs and Office of Principal Chief Controller of Accounts, Central Board of Direct Taxes. No extension in cut-off time will be allowed to agency banks by RBI beyond 1800 hours for uploading of these luggage files in QPX/e-Kuber. 11. State government transactions (electronic as well as in physical mode) of previous month reported after 8th of the succeeding month and those pertaining to earlier months should be reported to RBI through a separate statement for accounting, after being confirmed by the competent authorities of concerned State government. 12. For Central Government transactions (electronic as well as in physical mode) or any adjustments thereof, if reported after a gap of 90 days from the date of transaction, agency banks have to obtain prior approval from concerned ministry/department and submit the same to RBI separately at the time of reporting such transactions for settlement. Rates for agency commission 13. As per agency bank agreement, RBI pays agency commission at rates determined by it. The rates applicable with effect from July 1, 2019 are as under: Sr. No.

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2024-25/07 · issued 01 Apr 2024. The plain-English explanation above is BankPulse’s own independent summary.

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