[feb]Private banks can get government business

Question 1

earlier provisions?

Answer 1

only few large private sector banks (and of course PSBs) were allowed to take up Government related business like collection of taxes, pension payments and small savings schemes like PPF, Kisan Vikas Patra, Sukanya Samridhi Yojana etc.

Question 2

What will be provision from now on?

Answer 2

all private sector banks are now allowed to handle the above Govt. functions. Earlier RBI used to restrict these functions only to few large private banks but now Govt. has given the authorisation to RBI to allow all private banks for its business.

Question 3

Who decides role of other banks?

Answer 3

Actually RBI acts as “Banker to Central Govt. and State Govt.” So, RBI handles the banking functions of Govt. but then it DELEGATES some work to PSBs and few large private banks too and these banks act as “Agent Banks” (or “Agency banks”)

Question 4

what is Section 45 of the Reserve Bank of India Act, 1934?

Answer 4

provides for appointment of scheduled commercial banks as agents at all places or at any place in India. RBI carries out the general banking business of the governments through its own offices and commercial banks, both public and private, appointed as its agents (called Agency Banks).