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

The Reserve Bank of India (RBI) has opened up the activities of government agencies such as tax collection to scheduled payment banks and scheduled small finance banks (SFBs). This is part of a move to give private banks more leeway to conduct government agency business.

It has now been decided, in consultation with the Indian government, to make scheduled payment banks and small scheduled finance banks eligible to conduct such activities, RBI said in a notification.

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

Bank executives said it was a step toward a broad base of building and improving service quality for government enterprises. This provision is enabling and does not guarantee a certain volume of business. These banks should develop priorities and strategy for government businesses – central and state.

Earlier this year, in February, the government lifted the embargo imposed on the continued allocation of government business to private sector banks. The embargo was lifted from September 2021. Subsequently, the RBI reviewed and revised the framework (in May 2021) to license private sector banks programmed as agent banks.