Chapter III — Central Banking Functions

Section 21: Bank to have the right to transact Government business in India

Reviewed by CA Nikhil Gupta · Last reviewed 18 September 2026

Section 21 gives RBI the right to transact Central Government business in India and provides for the terms on which such business is carried out.

Operative provisionOfficial sources mappedProvision-specific decode

Finin2min - Section 21 in 2 minutes

Legal effectSection 21 gives RBI the right to transact Central Government business in India and provides for the terms on which such business is carried out.

Operative ruleThe section contemplates an agreement between the Central Government and RBI covering receipt, collection, payment, remittance, exchange and management of public debt and related matters.

Connected lawThe statutory right and the agency agreement should be read together; operational details may sit in the agreement rather than in the bare section.

File evidenceFor a disputed Government banking transaction, identify whether it falls within the Section 21 agreement and which institution was acting as RBI's authorised agent.

Statutory structure and clause / subsection decode

This map separates the operative limbs of this provision so thresholds, powers, conditions and exceptions are not collapsed into a single summary.

Scope

Section 21 gives RBI the right to transact Central Government business in India and provides for the terms on which such business is carried out.

Operative limb

The section contemplates an agreement between the Central Government and RBI covering receipt, collection, payment, remittance, exchange and management of public debt and related matters.

Legal boundary

The statutory right and the agency agreement should be read together; operational details may sit in the agreement rather than in the bare section.

Worked practical example

Facts. A payment handled through an agency bank can still be Government business under the RBI arrangement; the analysis should trace the agency chain rather than assume RBI must physically process every entry.

Compliance points and common mistakes

Do not decide the issue from the heading alone. Map the facts to the operative words of Section 21 and to each relevant subsection, clause, proviso or explanation shown above.
Keep the statutory question separate from the operational overlay. The statutory right and the agency agreement should be read together; operational details may sit in the agreement rather than in the bare section.
Do not convert an exception, exemption or discretionary RBI/Government power into an automatic entitlement. Record the authority, conditions and effective date.
Where the provision is historical, omitted or repealed, state that status prominently and do not present it as a current compliance obligation.

Connected provisions and instruments

Section 21 has no universal instrument dependency in this package. Add an RBI circular or direction only when its subject, entity and effective date cover the issue being analysed.

Questions and answers

What is the purpose of Section 21?

Bank to have the right to transact Government business in India: Section 21 gives RBI the right to transact Central Government business in India and provides for the terms on which such business is carried out.

Which statutory limb should be checked first?

Scope - Section 21 gives RBI the right to transact Central Government business in India and provides for the terms on which such business is carried out.

What is the next legal boundary?

Operative limb - The section contemplates an agreement between the Central Government and RBI covering receipt, collection, payment, remittance, exchange and management of public debt and related matters.

What record should support the conclusion?

Section 21 file evidence: For a disputed Government banking transaction, identify whether it falls within the Section 21 agreement and which institution was acting as RBI's authorised agent.

Primary sources

Source control for Section 21: use the official consolidated RBI Act for the statutory text and footnotes, then separately reconcile any post-Finance Act 2022 amendment, commencement notification or RBI instrument relevant to the event date.