Centre lifts embargo on grant of govt businesses to private banks

 Move will spur competition, promote efficiency in customer service standards

The Centre has lifted the restrictions on the grant of government businesses to private banks, Finance Minister Nirmala Sitharaman announced on Wednesday. All private sector banks now will be allowed to conduct government-related banking transactions, such as tax and pension payments.

Sitharaman in a tweet said that private banks can now be equal partners in the development of the Indian economy, furthering government social sector initiatives, and enhancing customer convenience.

“Embargo lifted on grant of government business to private banks. All banks can now participate,” she tweeted.

By lifting the embargo, this move will spur competition and promote greater efficiency in the standards of customer services, the Department of Financial Services said in a statement.

In a statement, the finance ministry said the government has conveyed its decision to the Reserve Bank of India (RBI). “With the lifting of the embargo, there is now no bar on the RBI for authorisation of private banks for government business, including government agency business,” the statement added.

Government-related banking transactions include taxes and other revenue payments, pension payments, and small savings schemes.

In 2012, the finance ministry had not allowed private banks, barring some, to undertake government business for three years.

In 2015, the government had continued with the embargo, and allowed the private sector with existing government agency business to continue without any fresh authorisation to private banks.