Engage more private banks in agency business of Central & State Governments: ASSOCHAM plea

Apex industry body ASSOCHAM has suggested the Union Government to engage private sector banks in the agency business of Central and State Governments to enable faster implementation of subsidy schemes of the Government thereby complimenting the Prime Minister's hugely successful Jhan Dhan Yojana.

In a note submitted to the Union Finance Minister, Mr Arun Jaitley, The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has stated that 'induction of additional private sector banks will widen reach of Indian private sector banks to provide financial services at lower cost together with greater convenience to all end consumers.'

De-regulation of savings rate which has happened in October 2012 will further enable maximizing financial benefits for larger masses with higher realization of interest earnings for savers, noted ASSOCHAM.

This will also enhance utilization of Jan Dhan accounts and for larger convenience of a tax payer, he/she should be allowed to remit taxes from his/her main account instead of only relying on 3 empanelled private sector banks, it added.

Stressing upon the need for higher engagement of private banks in both Central and State Governments' agency business, ASSOCHAM in its letter highlighted that with the vision of ensuring better access and convenience for citizens and industry, former Prime Minister Atal Bihari Vajpayee's Government in 2003 took the key initiative of inducting private banks in Government Business.

Initially only three private sector banks viz., ICICI, HDFC and Axis Banks were permitted to act as agency bank with a plan to include more banks in a phased manner. Subsequently the Reserve Bank of India (RBI) authorized all Private Sector Banks to handle Government Business as Agency Banks dated January 31, 2012 .

However, the process of inducting banks to handle Government Business in various states has since been in abeyance without any decision making on this front, said Mr D.S. Rawat, secretary general of ASSOCHAM.

In its note submitted to the FM, ASSOCHAM has suggested various criteria that can be adopted by the RBI for empanelment of additional private banks for Government Business as agency bank - it should have net worth of Rs 5,000 crore (as on March 31, 2014) together with a paid up capital of Rs 200 crore, having a network of about 500 branches, capital adequacy ratio of nine per cent, net non-performing assets being lower than or equal to two per cent of total advances, should have been consistently meeting priority sector lending for past three financial years, having minimum 'AA-' as its credit rating and international rating at par with sovereign rating

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