Reserve Bank of India
July 1, 2017
All Agency Banks
Dear Sir / Madam
Master Circular on Conduct of Government Business by Agency Banks – Payment of Agency Commission
Please refer to our Master Circular RBI/2015-16/81 dated July 1, 2015 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 June 30, 2017.
2. A copy of the revised Master Circular is enclosed for your information. This circular may also be downloaded from our website www.mastercirculars.rbi.org.in.
Principal Chief General Manager
Encl: As above
MASTER CIRCULAR ON AGENCY COMMISSION
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:
a. Revenue receipts and payments on behalf of the Central/State Government
b. Pension payments in respect of Central / State Governments
c. Special Deposit Scheme (SDS) 1975
d. Public Provident Fund (PPF) Scheme, 1968
e. Senior Citizen Savings Scheme (SCSS), 2004
f. Kisan Vikas Patra, 2014 and Sukanya Samriddhi Account
g. Any other item of work specifically advised by Reserve Bank as eligible for agency commission (viz. Relief Bonds/ Savings Bonds etc. transactions)
3. 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. Transactions arising out of Letters of Credit / Bank Guarantee opened by banks on behalf of Ministries/Departments etc. do not qualify for agency commission.
4. 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.
5. 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.
6. All agency banks while claiming agency commission should certify that no claim of agency commission is made on ineligible transactions.
7. Agency banks paying their own tax liabilities through their own branches or through authorized branches of State Bank of India or offices of Reserve Bank of India wherever they do not have their own authorized 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.
In this connection, it is clarified that the following activities do not come under the purview of agency bank business and are therefore not eligible for payment of agency commission.
(a) Furnishing of bank guarantees/security deposits, etc. through agency banks by government contractors/suppliers, which constitute banking transactions undertaken by banks for their customers.
(b) The banking business of autonomous/statutory bodies/Municipalities/ Corporations/Local Bodies.
(c) Payments of a capital nature such as capital contributions/subsidies/grants made by governments to cover losses incurred by autonomous/statutory bodies/ Municipalities/ Corporations/Local Bodies.
(d) Prefunded schemes which may be implemented by a Central Government Ministry/Department (in consultation with CGA) and a State Government Department through any bank.
Rates for agency commission
8. As per paragraph 5 of the agency bank agreement, RBI pays agency commission at rates determined by it. The rates applicable with effect from July 1, 2012 are as under:
|Sr. No.||Type of Transaction||Unit||Revised Rate|
|a.||(i)||Receipts – Physical mode||Per transaction||Rs. 50|
|(ii)||Receipts – e-mode||Per transaction||Rs. 12|
|b.||Pension Payments||Per transaction||Rs. 65|
|c.||Payments other than Pension||Per Rs. 100 turnover||5.5 paise|
9. In this context, the ‘Receipts-e-mode transactions’ indicated against Sr. No. a.(ii) in the above table 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.
10. With reference to the implementation of Goods and Service Tax (GST) regime, it is advised that 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. Thus, all such records clubbed under a single challan i.e., CPIN have to be treated as a single transaction for the purpose of claiming agency commission. This will come into effect from July 1, 2017.
11. Similarly, in case of transactions not covered under GST, it is emphasized that 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. Therefore, records clubbed under a single challan processed successfully have to be treated as a single transaction for the purpose of claiming agency commission.
12. Agency banks would be eligible to claim agency commission for pension transactions at the rate of ₹ 65/- 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 bank branches 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 categorized under ‘other than pension payment’ and would be eligible for payment of agency commission @ 5.5 paise per ₹ 100/- turnover w.e.f. July 1, 2012.
13. 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. Thus, broadly, the agency commission is payable to the agency banks as detailed below:
a. At the full rate, in cases 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.
b. 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 Reserve Bank of India or any agency bank conducting government business.
c. 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.
14. The number of transactions eligible for payment of agency commission should not exceed 14 per pensioner per year. This includes one monthly credit for payment of net pension and a maximum of two per year for payment of arrears on account of increase in dearness relief, if applicable. Cases involving payment of arrears on account of late start/restart of pension qualifies as a single transaction for claiming of agency commission. In other words, 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.
Claiming agency commission
15. Agency banks are required to submit their claims for agency commission in the prescribed format to CAS Nagpur in respect of Central government transactions and the respective Regional Office of Reserve Bank of India for State government transactions. The revised formats for claiming agency commission for all agency banks and separate and distinctive set of certificates to be signed by the branch officials and Chartered Accountants are given in Annex-2. These certificates would be in addition to the usual Certificate from ED / CGM (in charge of government business) to the effect that there are no pension arrears to be credited / delays in crediting regular pension / arrears thereof.
16. Where the External Auditor is also the Concurrent Auditor / Statutory Auditor, claims can be certified by such Concurrent Auditor / Statutory Auditor. The auditor’s certificate should, inter-alia, state that:
a. ‘receipt’ and ‘pension payment transactions’ as also the agency commission claims for ‘payments other than pension payments’ indicated in the agency commission claim application submitted to the RBI are tallied with the records maintained at the concerned branch/es of the agency bank; and
b. the agency commission claims made in respect of volume (number) based transactions viz. ‘receipt’ and ‘pension payment transactions’ have been claimed only once and the same stands excluded while arriving at value based transactions in respect of ‘payments other than pension payments’.
In addition to this, agency banks are required to ensure that the agency bank’s internal inspectors / auditors verify the agency commission claims submit
17. Agency banks are required to ensure that agency commission claims submitted to the Regional Offices of Reserve Bank of India / Central Accounts Section, Nagpur in the prescribed format are accurate. Agency banks may also alert their branches concerned to ensure that agency commission claims submitted to our Regional Offices are accurate. Such erroneous claims, if certified by the Internal / Concurrent Auditors, will defeat the very purpose of making such requirement an essential condition for making quarterly claims.
18. Agency banks are advised to furnish their claim on agency commission to Reserve Bank from two quarters to 90 days from the end of the quarter in which the transactions have been conducted. If the banks fail to lodge the claims within the stipulated period mentioned above they may forward the same only after giving reasons for delay. This will be applicable for the agency commission claims for the quarter ended June 30, 2017 onwards.
19. RBI decided to reimburse agency banks the amount of Service Tax paid by them on agency commission with effect from July 1, 2012.
Deduction of TDS on Agency Commission
20. Central Board of Direct Taxes (CBDT) has clarified that ‘tax would not be required to be deducted by RBI on the agency commission paid or credited by it to agency banks for transacting general banking business of the Central Government and State Governments’. However, agency commission would be taxable in the accounts of banks concerned as it is part of the bank’s income.
Penal interest for wrong claims
21. Agency banks will be liable to pay penal interest at Bank Rate as notified by Reserve Bank of India plus 2% for any wrong claims of agency commission settled.
List of circulars consolidated in the Master Circular
|1.||DGBA.GAD.No.H-190/31.12.010/2003-04||September 14, 2003||TDS on Agency Commission will not be effected by RBI|
|2.||DGBA.GAD.No.H-41/42.02.001/2003-04||July 22, 2004||Scheme for acceptance of Income and other direct taxes (Central Government) and Profession tax/other taxes of State Governments through agency banks.|
|3.||DGBA.GAD.No.H-1225-1258/ 42.02.001/2004-05||October 27, 2004||Scheme for acceptance of Income and other direct taxes (Central Government) and Profession tax/other taxes of State Governments through agency banks|
|4.||DGBA.GAD.No.H-2625-2658/ 31.12.010(C)/2004-05||December 17, 2004||Remuneration for conduct of Government business by agency banks – Payment of Turnover Commission|
|5.||DGBA.GAD.No.H-3568-3601/42.01.001/2004-05||January 13, 2005||Scheme for acceptance of Income and other direct taxes (Central Government) and Profession tax/other taxes of State Governments through agency banks|
|6.||DGBA.GAD.No.H-4530/31.12.010(C)/2005-06||October 27, 2005||Agency Commission claims submitted by agency banks – common irregularities|
|7.||DGBA.GAD.No.H-11136/31.12.010(C)/2005-06||January 31, 2006||Agency Commission claims submitted by agency banks – common irregularities|
|8.||DGBA.GAD.No.H-11794/31.12.010(C)/2005-06||February 13, 2006||Agency Commission on Special Deposit Scheme|
|9.||DGBA.GAD.No.H-13118/31.12.010(C)/2005-06||March 2, 2006||Agency Commission claims submitted by agency banks – common irregularities|
|10.||DGBA.GAD.No.H.13034/31.12.010(C)/2006-07||February 27, 2007||Agency Commission on pension transactions|
|11.||DGBA.GAD.No.H-14024/31.12.010/2006-07||March 16, 2007||Agency Commission towards Public Provident Fund Scheme, 1968 (PPF) and Senior Citizen Savings Scheme 2004 (SCSS)|
|12.||DGBA.GAD.H-1800/ 31.12.010(C)/2009-10||August 21, 2009||Abnormal increase in agency commission claims|
|13.||DGBA.GAD.H-3903/31.12.010(C)/2009-10||November 11, 2009||Agency Commission claims to be certified by the External Auditor / Chartered Accountant|
|14.||DGBA.GAD.No.H.160/31.12.010(C)/2010-11||July 7, 2010||Agency Commission claims to be certified by the External Auditor|
|15.||DGBA.GAD.No.H-670/31.12.010(C)/2010-11||March 24, 2011||TDS on Agency Commission will not be effected by RBI|
|16.||DGBA.GAD.No.H-8852/31.12.010(C)/2010-11||June 21, 2011||Payment of agency commission on collection of Registration fee and Stamp Duty|
|17.||DGBA.GAD.No.7575/31.12.011/2011-12||May 22, 2012||Agency Commission on pension transactions|
|18.||DGBA.GAD.No.H.2529/31.12.010(C)/2012-13||October 31, 2012||Conduct of Government Business by Agency Banks – Payment of Agency Commission – Revised Format for claiming agency commission by banks-Implementation of Working Group recommendations|
|19.||DGBA.GAD.No.H-2995/ 31.12.010/2014-15||January 7, 2015||Payment of agency commission – Certification of claims by external auditors|
|20.||DGBA.GAD.No.14/15.02.003/2015-16||July 2, 2015||Kisan Vikas Patra, 2014 and Sukanya Samriddhi Account|
|21.||DGBA.GAD.No.617/31.12.010(C)/2015-16||August 13, 2015||Conduct of Government Business by Agency Banks – Payment of Agency Commission|
|22.||DGBA.GAD.No.1636/31.12.010/2015-16||November 10, 2015||Payment of agency commission – Certification of claims by external auditors|
|23.||DGBA.GAD.No.2278/31.12.010/2015-16||January 21, 2016||Payment of Agency Commission on pension accounts|
|24.||DGBA.GBD.No.3262/31.02.007/2016-17||June 15, 2017||Period for Submission of Agency Commission Claims|
|24.||DGBA.GBD.No.3333/31.02.007/2016-17||June 22, 2017||Payment of agency commission for government receipts|
|25.||DGBA.GBD.No.3364/31.02.007/2016-17||June 29, 2017||Conduct of Government Business by Agency Banks – Payment of Agency Commission|