Reserve Bank reverts to old commission for govt payments

The Reserve Bank of India (RBI) has provided a major relief to banks by reverting to calculation of commission for handling government payments on the basis of value of transactions, except in the case of pension payments.

The banks' agency commission would be 9 paise per Rs 100 against Rs 50 per payment transaction hitherto. The revised rates would come into effect from July 1, 2005, RBI said in a circular to the major commercial banks today.

The revised commission structure is effective from the date the change in the basis of calculating the commission was made applicable. As in pension payments, government receipts will continue to be on transaction basis. These rates are unchanged at Rs 45 per transaction for receipts and Rs 60 per pension payment.

Banks such as State Bank of India, Punjab National Bank and ICICI Bank would benefit from this decision as they have significant shares in government business.

SBI, which has a major share in the government business, was hit hard in 2005-06 owing to the change in the basis of commission for government business.

RBI said it had received representations from agency banks stating that the present rates of agency commission did not compensate them adequately and there was been reduction in the commensurate commission receivable by them.

These banks had highlighted the fact that banks remained out of funds for a few days owing to high value payments on behalf of the government, including salaries of government employees, RBI said.