Reserve Bank of India
July 2, 2018
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/2017-18/2 dated July 1, 2017 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, 2018.
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.
(Charulatha S. Kar)
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:
The Agency banks also undertake the work related to Small Savings Schemes the commission for which is borne by Government of India. However, the settlement of such commission continues to be processed by RBI. Agency commission claims on SDS related transactions (where mirror accounts are maintained in RBI) are settled at Central Accounts Section (CAS), Nagpur and not in respective Regional Offices of RBI.
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 as RBI only reimburses the paid amount to the banks based on the mandate received from the governments.
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.
Government transactions not eligible for agency commission
7. Agency banks paying their own tax liabilities through their own branches or through authorised branches of State Bank of India or offices of Reserve Bank of India wherever they do not have their own authorised 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.
8. 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/ companies/ 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.
(e) Transactions related to Gold Monetisation Scheme 2015
Reporting of transactions by agency banks to RBI
9. State government transactions (electronic as well as in physical mode) of previous month reported after 8th of the succeeding month and those pertaining to earlier months should be reported to RBI through a separate statement for accounting, after being confirmed by the competent authorities of concerned state government.
10. For Central Government transactions (electronic as well as in physical mode) or any adjustments thereof, if reported after a gap of 90 days from the date of transaction, agency banks have to obtain prior approval from concerned ministry/department and submit the same to RBI separately at the time of reporting such transactions for settlement.
Rates for agency commission
11. As per 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||₹ 50/-|
|(ii)||Receipts – e-mode||Per transaction||₹ 12/-|
|b.||Pension Payments||Per transaction||₹ 65/-|
|c.||Payments other than Pension||Per ₹ 100 turnover||5.5 paise|
12. 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.
13. 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 effective July 1, 2017.
14. Similarly, in case of transactions not covered under GST, it is emphasised 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.
15. 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 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 @ 5.5 paise per ₹ 100/- turnover w.e.f. July 1, 2012.
16. 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.
17. 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:
18. All agency banks should settle their agency transactions for both funds and agency commission directly with the concerned Regional Office of Reserve Bank instead of routing them through any other agency bank that acts as aggregator in certain cases. So also for payments made by all agency banks on behalf of state government/s get directly settled with the concerned Regional Office of RBI. Agency Transaction details/scrolls may be sent directly by individual agency bank to the concerned State Government/Treasury. This new arrangement for settlement of state government funds on day to day basis (receipts and payments) directly with Reserve Bank is with effect from January 1, 2018.
Claiming agency commission
19. 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. However, agency commission claims with respect to GST receipt transactions will be settled at Mumbai Regional Office of Reserve Bank of India only and accordingly all agency banks, authorized to collect GST, are advised to submit their agency commission claims pertaining to GST receipt transactions at Mumbai Regional Office only. 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.
20. 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:
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 submitted by their branches and confirm their accuracy during the course of their inspection / audit.
21. Agency banks are required to ensure that agency commission claims submitted to the Regional Offices of Reserve Bank of India / Central Accounts Section, Nagpur as applicable 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.
22. Agency banks are advised to furnish their claim on agency commission to Reserve Bank within 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 to RBI only after giving reasons for delay.
23. RBI has decided to reimburse agency banks the amount of Service Tax paid by them on agency commission with effect from July 1, 2012 and the amount of GST paid by them on agency commission with effect from July 1, 2017.
24. The reimbursement of MDR charges on debit card use (up to Rs.one lakh) can be claimed from RBI separately as per extant guidelines. Deduction of MDR charges from the receipts of government is not permissible. The full amount paid to the Government by the customers / through debit / credit cards should be remitted to the concerned Government Ministry / Department. The MDR charges on debit card transactions above Rs.one lakh are not being absorbed by Government of India and hence will not be reimbursed by RBI. MDR charges on any credit card transaction are not eligible for reimbursement by RBI.
The reimbursement of MDR charges on debit cards / BHIM – UPI transactions of value less than or equal to ₹ 2000/- will be borne by Government of India and the claims for reimbursement will be settled by Central Accounts Section, RBI, Nagpur.
Deduction of TDS on Agency Commission
25. 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
26. 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|
|25.||DGBA.GBD.No.3333/31.02.007/2016-17||June 22, 2017||Payment of agency commission for government receipts|
|26.||DGBA.GAD.No.2294/15.04.001/2016-17||March 6, 2017||Gold Monetisation Scheme|
|27.||DGBA.GAD.No.505/31.02.007/2017-18||September 07, 2017||Reimbursement of Merchant Discount Rate|
|26.||DGBA.GAD.No.1007/15.04.001/2017-18||October 17, 2017||Gold Monetisation Scheme, 2015|
|27.||DGBA.GBD.No.1324/31.02.007/2017-18||November 16, 2017||Agency Commission for GST receipt transactions|
|28.||DGBA.GBD.1472/31.02.007/2017-18||November 30, 2017||Reporting of Transactions by agency banks to RBI|
|29.||DGBA.GBD.No.1498/31.02.007/2017-18||December 7, 2017||Settlement of Agency transactions in certain cases (for Funds and Agency Commission) directly from Reserve Bank of India|
|30.||DGBA.GBD.No.1972/15.02.005/2017-18||February 01, 2018||Small Saving Schemes – Payment of Agency Commission|
|31.||DGBA.GBD.No.2294/15.01.001/2017-18||March 15, 2018||Agency Commission payable to banks for operating Special Deposit Scheme (SDS)|
|32.||DGBA.GBD.No.2773/43.33.001/2017-18||May 04, 2018||Reimbursement of MDR charges on debit cards / BHIM – UPI transactions of value less than or equal to ₹ 2000/-|