Skip to main content

Conduct of Government Business by Agency Banks and payment of agency commission

Reserve Bank of India (RBI) has updated the guidelines on conduct of government business by agency banks and payment of agency commission.

Why agency banks are paid commission?

  • RBI 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. 

Which government transactions are eligible for agency commission?

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.

Which government transactions are not eligible for agency commission?

The following transactions are not eligible for agency commission –

  • Short term / long term borrowings of State Governments raised directly from financial institutions and banks (RBI pays the agency banks separate remuneration for acting as agents for management of public debt).
  • 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 RBI wherever they do not have their own authorised direct tax collection branch. 
  • 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 are pre-funded or where some compensation is paid by the Government concerned.
  • 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. as RBI only reimburses the paid amount to the banks based on the mandate received from the governments.

When is stamp duty collection eligible for agency commission?

  • 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.
  • 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. 
  • 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.

What are the rates for agency commission?

  • As per agency bank agreement, RBI pays agency commission at rates determined by it. The rates applicable are as under –

Type of Transaction Unit Rates (w.e.f. July 1, 2019) Revised Rates (w.e.f. April 1, 2025)
Receipts - Physical mode Per transaction ₹40/- ₹40/-
Receipts - e-mode Per transaction ₹9/- ₹12/-
Pension Payments Per transaction ₹75/- ₹80/-
Payments other than Pension Per ₹ 100 turnover 6.5 paise per ₹100 7 paise per ₹100

  • ‘Receipts-e-mode transactions’ refer to those transactions involving remittance of funds from the remitter’s bank account through Internet banking as well as such transactions which do not involve physical receipt of cash / instruments at all. For example, challan generated electronically and submitted to agency bank along with cash / instrument should be treated as transaction under physical mode.
  • A single Common Portal Identification Number (CPIN), processed successfully leading to generation of a Challan Identification Number (CIN), under GST payment process, may be treated as a single transaction, even if multiple major head / sub major head / minor head of accounts are credited. This means that CGST, SGST, IGST and Cess etc. paid through a single challan would constitute a single transaction. 
  • In case of transactions not covered under GST, a single challan (electronic or physical) should be treated as single transaction only and not multiple transactions, even if the challan contains multiple major head / sub major head / minor head of accounts that will get credited. 
  • Agency banks would be eligible to claim agency commission for pension transactions at the rate of ₹80 per transaction only when the entire work relating to disbursement of pension including pension calculation is attended to by them. If the work relating to pension calculations etc. is attended to by the concerned Government Department / Treasury and the banks are required only to credit the amount of pension to the pensioners' accounts maintained with them by a single debit to Government Account, such transaction is to be categorised under ‘other than pension payment’ and would be eligible for payment of agency commission @ 7 paise per ₹ 100/- turnover.

What are the maximum number of pension transactions for claiming agency commission?

  • The number of transactions eligible for payment of agency commission should not exceed 14 per pensioner per year. This includes 1 monthly credit for payment of net pension and a maximum of 2 per year for payment of arrears on account of increase in dearness relief, if applicable. 
  • Any payment of arrears on account of late start / restart of pension should be treated as a single credit transaction and not as separate monthly credits.

How is agency commission shared by agency banks?

Agency commission is payable to an agency bank at the full rate provided the transactions are handled by the bank at all stages.  Where, however, the work is shared between two banks, the agency commission is shared between the banks in the proportion of 75:25.  The agency commission is payable to the agency banks as below –

  • At the full rate, where the transactions are handled by the bank at all stages, i.e., up to the stage of dispatch of scrolls and challans / cheques to the Pay and Accounts Offices, and treasuries / sub-treasuries.
  • At 75% of the applicable rate, where the dealing branch is required to account for the transaction by passing on the scrolls and documents to the local / nearest branch of RBI or by any agency bank conducting government business.
  • At 25% of the applicable rate, in the case of agency branch which received the scrolls and documents from dealing branches of other banks and is responsible for the accounting of these transactions and dispatching of the scrolls and documents to the Pay and Accounts Offices, Treasuries, etc.

How shall agency commission be claimed by agency banks?

• Agency banks are required to submit their claims for agency commission to Central Accounts Section (CAS), Nagpur in respect of Central government transactions and the respective Regional Office of RBI for State Government transactions. The agency commission claim for Central Government transactions reported to CAS, Nagpur, RBI will be settled at CAS, Nagpur, RBI. 

  • Agency commission claims with respect to GST receipt and transactions related to direct tax collection under TIN 2.0 regime, and transactions pertaining to collection of indirect taxes through ICEGATE reported to Mumbai Regional Office, RBI will be settled at Mumbai Regional Office of RBI only and agency banks shall submit their agency commission claims for such transactions at Mumbai Regional Office only. 
  • Though the settlement of commission on Small Savings Schemes (SSS) is processed by RBI and settled at CAS, Nagpur, the commission is borne and the rates of agency commission are decided by Government of India. 
  • Agency commission claims on Special Deposit Scheme (SDS) related transactions (where mirror accounts are maintained in RBI) are settled at CAS, Nagpur.
  • Agency banks shall furnish their claim on agency commission to RBI within 60 calendar days from the end of the quarter in which the transactions have been conducted.

What is the penalty for submission of wrong claim by agency banks?

Agency banks will be liable to pay penal interest at Bank Rate plus 2% for any wrong claims of agency commission settled.


References

Reserve Bank of India. (2025, April 01). 'Master Circular on Conduct of Government Business by Agency Banks - Payment of Agency Commission'. Retrieved from https://website.rbi.org.in/web/rbi/-/notifications/master-circular-on-conduct-of-government-business-by-agency-banks-payment-of-agency-commission-1

Reserve Bank of India. (2025, June 16). 'Review of instructions issued vide Master Circular on Conduct of Government Business by Agency Banks - Payment of Agency Commission'. Retrieved from https://website.rbi.org.in/web/rbi/-/notifications/review-of-instructions-issued-vide-master-circular-on-conduct-of-government-business-by-agency-banks-payment-of-agency-commission


Follow at - Telegram   Instagram   LinkedIn   X   Facebook

Labels:

Comments

Post a Comment

Popular Posts

Amendments in / additions to forex guidelines

Reserve Bank of India (RBI) has amended various forex guidelines. This article lists out some of the such recent amendments. What are the updates in the existing guidelines? Previous guidelines Revised guidelines Persons resident outside India that maintain a rupee account in terms of regulation 7(1) of Foreign Exchange Management (Deposit) Regulations, 2016 may purchase or sell dated Government Securities / treasury bills. The amount of consideration paid for the purchases shall be out of the funds held in the said rupee account. Persons resident outside India that maintain a rupee account in terms of regulation 7(1) of Foreign Exchange Management (Deposit) Regulations, 2016 may purchase or sell dated Government Securities / treasury bills and non-convertible debentures / bonds and commercial papers issued by an Indian company. The amount of consideration paid for the purchases shall be out of the funds held in the said rupee account. The balance...
Post a Comment
Read more

FX Global Code

Reserve Bank of India (RBI) has signed its renewed Statement of Commitment (SoC) to the FX Global Code.  What is FX Global Code? FX Global Code is a set of global principles of good practice in the foreign exchange market. The Code contains 55 principles that provide a common set of guidelines to promote the integrity and effective functioning of the wholesale foreign exchange market. The principles cover ethics, governance, execution, information sharing, risk management and compliance as well as confirmation and settlement. The establishment of the Code was facilitated by the Foreign Exchange Working Group (FXWG), which operated under the auspices of the BIS Markets Committee.  The Code was developed by a partnership between central banks and market participants from around the globe and was first published in 2017. The Code promotes a robust, fair, liquid, open, and appropriately transparent market in which a diverse set of market participants, supported by resilient infras...
Post a Comment
Read more

Nomination for demat accounts and mutual fund folios

Securities and Exchange Board of India (SEBI) had revised the guidelines on nomination for demat accounts and mutual fund folios.   Which entities are covered by the guidelines? The following regulated entities (REs) are covered by the guidelines – Asset Management Companies (AMCs) of Mutual Funds (MFs) and their Registrars to an issue and share Transfer Agents (RTAs)  Association of Mutual Funds in India (AMFI)  Recognized Depositories  Registered Depository Participants (DPs) What are the guidelines on nomination facility? Nomination shall be mandatory for single holding and optional for jointly held accounts / folios. However, an investor having single holding / account / folio can opt-out of nomination, either online or through physical / offline mode. In case a joint account / folio becomes single holding, post the demise of holders, either nomination or ‘opt-out’, is mandatory. Investors shall have the option to specify guardians when nominees are minors....
Post a Comment
Read more

Nomination Facility in Banks

Reserve Bank of India (RBI) has issued directions on nomination facility in deposit accounts, safe deposit lockers and articles kept in safe custody with the banks. What is the legal framework for nomination facility in banks? Banking Regulation Act, 1949 (BR Act) contain provisions on nomination facility in banks. Section 45ZA – Nomination for payment of depositors' money  Where a deposit is held by a banking company to the credit of one or more persons, the depositor / all the depositors together, may nominate one person to whom in the event of his / their death, the amount of deposit may be returned by the banking company. Where the nominee is a minor, the depositor shall appoint any person to receive the amount of deposit in the event of his death during the minority of the nominee. Section 45ZC – Nomination for return of articles kept in safe custody with banking company  Where any person leaves any article in safe custody with a banking company, such person may nominate ...
Post a Comment
Read more

Recognition of Self-Regulatory Organisations (SROs) for Non-Banking Financial Companies (NBFCs)

Reserve Bank of India (RBI) has invited applications for recognition of Self-Regulatory Organisations (SROs) for Non-Banking Financial Companies (NBFCs). What is the basis of Self-Regulatory Organisations (SROs) for Non-Banking Financial Companies (NBFCs)? Reserve Bank of India (RBI) had issued ‘ Omnibus Framework for recognition of Self-Regulatory Organisations for Regulated Entities of the Reserve Bank ’ dated March 21, 2024, wherein broad parameters, viz., objectives, responsibilities, eligibility criteria, governance standards, application process, etc., were specified. It was also stated that other sector-specific guidelines like number of SROs, membership, etc., shall be issued separately whenever a sectoral SRO is intended to be set up. RBI has now invited applications for recognition of SROs for the NBFC sector under the aegis of the aforesaid omnibus framework.  What are the membership criteria for the SRO for NBFCs? The SRO for NBFC sector is primarily envisaged for NBFCs...
Post a Comment
Read more