Scheduled payment banks, SFBs to do government agency business: RBI

The Reserve Bank of India (RBI) has thrown open the government agency business like tax collection to scheduled payment banks and scheduled small finance banks (SFBs). This is part of move to provide further scope to private banks to conduct government agency business.

It has now been decided in consultation with the  government of India, to make scheduled payments banks and scheduled small finance banks eligible to conduct such business, RBI said in a notification.  

Any payment bank or small finance bank that intends to undertake government agency business may be appointed as an agent of RBI upon execution of an agreement with RBI. They can do so only when they comply with the overarching regulatory framework prescribed for these banks.

Bank executives said this is step to broad-base set up and enhance quality of service for government business. This is enabling provision and does not guarantee a certain business volume. These banks would have to work out priorities and strategy for business from governments – central and state.  

Early this year in February the government had lifted the embargo put on further allocation of Government business to private sector banks. The embargo was clamped from September 2021. Subsequently, RBI reviewed and revised the framework (in May 2021) for authorising Scheduled Private Sector Banks as agency banks.