Finance Minister Nirmala Sitharaman on Wednesday announced that the government is lifting the embargo on allowing private sector banks to conduct government-related banking transactions such as tax and other revenue payment facilities, pension payments and the small savings scheme.
Earlier only a few banks, state-run and a handful of private banks, were permitted to conduct such services, which includes collecting revenues and distributing payments under government schemes.
“This step is expected to further enhance customer convenience, spur competition and higher efficiency in the standards of customer services. Private sector banks, which are at the forefront of imbibing and implementing latest technology and innovation in banking, will now be equal partners in development of the Indian economy and in furthering the social sector initiatives of the Government,” the Ministry of Finance said in a release.
“With the lifting of the embargo, there is now no bar on RBI for authorization of private sector banks (in addition to public sector banks) for Government business, including Government agency business,” it said.
The government has conveyed its decision to RBI, it added.
Announcing the move, the Department of Financial Services said it would make receiving tax payments and pensions easy.
