Reserve Bank of India (RBI) has issued guidelines on the conduct of Government business by Agency Banks (ABs), payment of agency commission to ABs and disbursement of Government pension by ABs.
Who are ABs?
ABs mean all Public Sector Banks (PSBs), scheduled Private Sector Banks (PVBs), scheduled Payments Banks (PBs), and scheduled Small Finance Banks (SFBs) appointed by the RBI under Section 45 of the RBI Act, 1934, by mutual agreement, to carry out Government banking business of the Central Government (CG) / State Governments (SGs).
What is agency commission?
Agency commission means the remuneration paid by the RBI to an AB in consideration of it acting as an agent of the RBI in the conduct of general banking business of the CG and the SGs at the places and in the manner specified in the agreement between the RBI and the bank, with the exception of the functions relating to the management of the public debt.
What are the guidelines on appointment of ABs?
- Any eligible bank which intends to handle Government business will be appointed as an AB upon execution of an agreement with the RBI.
- The choice of accrediting an AB for any particular Government business rests solely with the respective CG department / Union Territory (UT) / SG.
Which government transactions are eligible for agency commission?
- The following transactions undertaken by ABs are eligible for agency commission –
- Revenue receipts on behalf of the CG / SGs.
- All payment transactions, including pension payments in respect of CG / SGs, handled by ABs, except those which are pre-funded or where compensation is paid by the Governments to the ABs.
- Whenever ABs collect stamp duty through physical mode or e-mode (challan based), they are eligible for agency commission, provided the ABs do not collect any charges from the public or receive remuneration from the SG.
- If the AB is engaged by the SG 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 SG is paying commission to it. However, the AB, which collects the stamp duty paid by the Franking Vendor for credit to the Government Treasury through challan (in either physical or e-mode) for purchase of franking bar, would be eligible for agency commission.
Which government transactions are not eligible for agency commission?
The following activities are not eligible for agency commission –
- ABs paying their own tax liabilities through their own branches or through authorised branches of any other AB, including State Bank of India (SBI) or offices of the RBI, wherever they do not have their own authorised direct tax collection branch.
- Furnishing of Bank Guarantees (BGs) / Security Deposits, etc., through ABs by Government contractors / suppliers, as they constitute banking transactions undertaken by banks for their customers.
- Short-term / long-term borrowings of SGs, raised directly from financial institutions and banks. RBI pays the ABs separate remuneration for acting as agents for management of public debt.
- The banking business of Autonomous / Statutory bodies / Municipalities / Companies / Corporations / Local Bodies.
- Pre-funded schemes, which may be implemented by a CG Ministry / Department or a SG department. Pre-funded scheme means an arrangement where funds are paid in advance by the Government to the AB to cover future liability, obligation or settlement.
- Transactions related to Gold Monetisation Scheme (GMS), 2015.
- Transactions arising out of Letter of Credit (LC) / BG opened by banks on behalf of Ministries / Departments etc., as the RBI reimburses the paid amount to the banks based on the mandate received from the Governments.
What are the rates of agency commission?
- As per the agreement with the AB, the RBI pays agency commission at rates determined by it. The rates applicable with effect from April 01, 2025, are given below –
| Type of Transaction | Unit | Rate |
| Receipts (physical mode) | Per transaction | ₹40 |
| Receipts (e-mode) | Per transaction | ₹12 |
| Pension payments | Per transaction | ₹80 |
| Payments other than pension | Per ₹100 turnover | 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 / debit card / credit card / UPI, etc., as well as such transactions which do not involve physical receipt of cash / instruments at all. For example, challan generated electronically and submitted to AB, along with cash / instrument, should be treated as a transaction under physical mode.
- A Challan Identification Number (CIN), generated after successful processing of a single Common Portal Identification Number (CPIN), under Goods and Services Tax (GST) payment process, should be treated as a single transaction, even if multiple major head / sub-major head / minor head of accounts are credited. To illustrate, 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 a single transaction, even if the challan contains multiple major head / sub-major head / minor head of accounts that will get credited.
What is the procedure for claiming agency commission?
- ABs shall submit their claims for agency commission to the Central Accounts Section (CAS), RBI, Nagpur in respect of CG transactions, and to the respective Regional Office (RO) of the RBI for SG transactions, respectively.
- However, agency commission claims related to GST receipts, direct tax collection under Tax Information Network (TIN) 2.0, and of indirect taxes collection through Indian Customs Electronic Gateway (ICEGATE) shall be reported to Mumbai RO, RBI.
- ABs shall furnish their claims for agency commission to the RBI within 60 calendar days, from the end of the quarter in which the transactions were conducted.
- All ABs shall submit agency commission claims related to Special Deposit Scheme (SDS) transactions to CAS on a quarterly basis.
- The agency commission relating to Small Savings Schemes (SSS) is settled at CAS.
- Reimbursement of payments made by banks, relating to Medium-Term and Long-Term Government Deposit (MLTGD) under the GMS, will be made by CAS.
What are other guidelines on payment of agency commission?
- ABs would be eligible to claim agency commission for pension transactions at the rate prescribed for pension payment transactions only when the entire work related to the disbursement of pension, including pension calculations, is attended to by them.
- If the work relating to pension calculations, etc., is attended to by the respective Government department / Treasury, and the bank only credits the pension to the pensioner’s account maintained with it by a single debit to the Government account, such transactions are categorised as ‘other than pension payment’ transactions.
- The number of transactions eligible for agency commission should not exceed 14 per pensioner per financial 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 (DR), 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.
- Agency commission is payable to an AB at the full rate provided the transactions are handled by the bank at all stages. However, wherever the work is shared between two banks, the agency commission is shared between the banks in the proportion of 75%:25%.
- ABs will be liable to pay penal interest at Bank Rate (as notified by the RBI) plus 2% for any wrong agency commission claimed.
What are the guidelines on recovery and refund of excess pension payment?
- No recovery of excess amount from the pension of a Government employee shall be effected without the pensioner’s knowledge and consent, or without the issuance of a prior notice.
- Whenever excess / wrongful pension payment is made due to AB-attributable errors such as clerical errors, arithmetical miscalculations or incorrect application of relevant instructions –
- The entire amount thereof should be credited to the Government account in lump sum immediately on detection.
- The pensioner should be immediately intimated through a written notice which should invariably contain the details of excess / wrong payment made, nature of error, proposed recovery method, and opportunity to make representation to the bank.
- Recovery can be made through one or more of the following methods, in order of preference –
- Available balance method – Recovery limited to surplus balance available in the account over a minimum protected amount.
- Percentage of pension method – Deduction capped at an agreed percentage (e.g., 10-25%) of monthly pension.
- Pensioner-requested method – Lump sum or customised instalments as required by the pensioner.
- No recovery shall be initiated after a cut-off period defined in the bank’s policy, unless –
- Fraud or misrepresentation by the pensioner is established.
- Recovery is mandated by law or court order.
- If the excess / wrong payment cannot be recovered from the pensioner due to his / her death or discontinuance of pension, then action has to be taken as per the Letter of Authorisation given by the pensioner.
- Whenever such excess / wrongful pension payment is made due to Government-attributed errors –
- The banks shall make recoveries based on the instructions received from the Government, presuming that the latter have complied with all the requirements envisaged by law, including court orders.
- However, if the recovery is to be made from the account balance of a pensioner (as distinguished from the amount payable as pension in a month), express authorisation from the customer should be made available to the bank.
What are other guidelines on disbursement of the Government pension by ABs?
- The procedure of forwarding the Government Orders in respect of DR, etc., through the RBI to ABs had been discontinued. ABs shall, therefore, act expeditiously on the basis of copies of the Government Orders provided by the Government to them through post, fax, email, etc., and / or by regularly accessing the Government websites.
- All ABs shall scrupulously follow all the orders contained in various notifications of the Government (Central as well as States) and take necessary action immediately without waiting for any further instructions from the RBI.
- The ABs shall credit the pension amount in the accounts of the pensioners based on the orders given by the respective Pension Sanctioning Authorities (PSAs).
- Link branches of ABs shall submit reimbursement claims to CAS for CG pension payments and to the Government Banking Divisions (GBDs) of the respective ROs for SG pension payments.
- ABs should compensate the pensioner for delay in crediting pension / arrears thereof at a fixed interest rate of 8% per annum for the period of delay after the due date of payment, if the delay is on account of error on the part of the AB. The compensation shall be credited to the pensioner’s account automatically, without any claim from the pensioner.
References
Reserve Bank of India. (2026, April 30). 'Reserve Bank of India [Conduct of Government Business by Agency Banks (ABs) – Payment of Agency Commission and Oversight of ABs] Directions, 2026'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13443&Mode=0
Reserve Bank of India. (2026, April 30). 'Reserve Bank of India [Disbursement of Government Pension by Agency Banks (ABs)] Directions, 2026'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13442&Mode=0
Reserve Bank of India. (2026, June 24). 'Reserve Bank of India [Disbursement of Government Pension by Agency Banks (ABs)] First Amendment Directions, 2026'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13530&Mode=0
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