Page 49 - Banking Finance June 2017

RBI CIRCULAR

RBI CIRCULAR

Systems and Controls for Conduct of Setting up of IFSC Banking Units (IBUs) -
Government Banking Permissible activities

RBI/2016-17/271 RBI/2016-17/273
DGBA.GAD.No.2646/31.02.007/2016-17 DBR.IBD.BC.59/23.13.004/2016-17

1. Please refer to our Master Circulars DGBA.GAD.No.2/ 1. Please refer to RBI circular DBR.IBD.BC.14570/
31.12.010/2015-16 dated July 1, 2015 on Conduct of 23.13.004/2014-15 dated April 01, 2015, as modified
Government Business by Agency Banks - Payment of from time to time, setting out RBI directions relating
Agency Commission and DGBA.GAD.No.H-1/31.05.001/
to IFSC Banking Units (IBUs). We have received a few
2015-16 dated July 1, 2015 on Disbursement of
suggestions and queries from the stakeholders regard-
Government Pension by Agency Banks that, inter alia,
ing operations of the IBUs and financial institutions in
deal with Systems and Controls in agency banks for
conduct of government banking. IFSCs. These issues have been examined and the direc-
tions stand further modified as follows:
2. In addition to existing instructions, agency banks may
ensure that internal/concurrent audit at bank branches 2. The existing paragraph No.2.6 (vii) of Annex I and II of
verifies whether government business is being the aforesaid circular dated April 1, 2015 is amended
conducted as per rules and regulations prescribed by to read as follows:
government/RBI. Accordingly, the internal/concurrent
audit at bank branches may also examine, among other "With the prior approval of their board of directors,
things, various aspects of government banking such as IBUs may undertake derivative transactions including
agency commission claims and pension payments. A structured products that the banks operating in India
checklist may be provided to the inspecting officers/ have been allowed to undertake as per the extant RBI
auditors, which may at a minimum include the items directions. However, IBUs shall obtain RBI's prior ap-
given in the Annex. Accordingly, Annex 2 of the Master proval for offering any other derivative products. Be-
Circular DGBA. GAD.No.H-1/31.05.001/2015-16 on fore seeking RBI's approval, banks shall ensure that
Disbursement of Government Pension by Agency Banks their IBUs have necessary expertise to price, value and
dated July 1, 2015 stands withdrawn. compute the capital charge and manage the risks as-
sociated with the products / transactions intended to
Yours faithfully, be offered and should also obtain their Board's approval
(D. J. Babu) for undertaking such transactions."
Deputy General Manager
3. A new paragraph No.2.6 (x) is added to the Annex I

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