Almost every other day, RBI is in the news for taking lots of decisions surrounding our country¡¯s economy and financial sector. It plays a pivotal role, amongst which being a banker to the government is a key one.?
So what exactly does the RBI do in this case? How does it play the role of a banker to the government? Let¡¯s find out.
In terms of Section 20 of the RBI Act 1934, Reserve Bank Of India has the obligation to undertake the receipts and payments of the Central Government and to carry out the exchange, remittance and other banking operations. Further, as per Section 21 of the said Act, RBI has the right to transact Government business of the Union in India.
State Government transactions are carried out by RBI in terms of the agreement entered into with the State Governments in terms of section 21 A of the Act. Such agreements as of now exist between RBI and all the State Governments except Government of Sikkim. Thus, the legal provisions vest the RBI with both the right and obligation to function as banker to the government, as mentioned on the RBI website.
RBI states that it carries out the general banking business of the governments through its own offices and commercial banks, both public and private, which are appointed as its agents. Section 45 of the Reserve Bank of India Act, 1934, provides for appointment of scheduled commercial banks as agents at all places or at any place in India, for purposes that it may specify, ¡°having regard to public interest, convenience of banking, banking development and such other factors which in its opinion are relevant in this regard¡±.
RBI maintains the Principal Accounts of Central as well as State Governments at its Central Accounts Section, Nagpur, the website mentions RBI has also put in place a well-structured arrangement for revenue collection as well as payments on behalf of Government across the country.?
Also, a network comprising the Government Banking Divisions of RBI and branches of agency banks appointed under Section 45 of the RBI Act carry out the government transactions. At present all the public sector banks and select private sector banks act as RBI's agents. And only designated branches of agency banks can conduct government banking business.
All the money for credit to government account like taxes or other remittances can be made by filling the prescribed challans of the Government/Department concerned. The tax payers are encouraged to pay dues to Government electronically by login in to respective government portals. However, if they prefer to pay dues by way of cash, cheque, demand draft, these are required to be tendered with the authorised agency bank branches along with requisite challan, as mentioned on RBI website.
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The RBI states that received challans in case of cash tender are generally handed over to the remitter immediately across the counter. And in case of payments made by cheque/DD, the received challan is issued only on realisation of the instruments based on the clearing cycle of the local Clearing House.?
RBI website also states that in all such cases, a paper token is issued to the depositor indicating the date on which the received challan will be ready for delivery. The received challan will have to be collected within a specified number of days from the date of delivery, as indicated on the paper token, by surrendering the paper token.
When it comes to GST, the RBI is the aggregator for accounting of all GST collections in the respective government accounts. Agency banks who collect the GST for challans generated by tax payers online on the GST portal report the collections for settlement to government accounts to RBI. RBI website mentions that it has also facilitated payment of GST by tax payers directly into government accounts at RBI by using NEFT / RTGS payment options provided in GST portal.
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