AGENCY BANKS OF RBI

Question 1

What is the role of agency banks in relation to the Reserve Bank of India (RBI)?

Answer 1

Agency banks act as agents for the RBI to provide various banking services to the public, including government business operations like tax collections, pension payments, and other government-related financial transactions.

Question 2

Under which section of the Reserve Bank of India Act are commercial banks listed as agency banks?

Answer 2

Commercial banks are listed as agency banks under Section 45 of the Reserve Bank of India Act, 1934.

Question 3

What types of banks can be designated as agency banks by the RBI?

Answer 3

All public sector banks and certain notified private sector banks, including a foreign bank licensed to operate in India through a wholly-owned subsidiary mode, can be designated as agency banks.

Question 4

What are some of the key functions performed by agency banks?

Answer 4

Key functions include the collection of central and state government taxes, disbursement of salaries and pensions, acting as intermediaries for small savings schemes, and providing other services like handling government bond issues.

Question 5

How do agency banks facilitate effective fiscal management?

Answer 5

Agency banks ensure the smooth functioning of financial transactions between the government and the public, which is crucial for effective fiscal management.