Chapter III — Central Banking Functions

Section 21A: Bank to transact Government business of States on agreement

Reviewed by CA Nikhil Gupta · Last reviewed 18 September 2026

Section 21A permits RBI to transact State Government business when RBI and the State Government enter into the statutory agreement.

Operative provisionOfficial sources mappedProvision-specific decode

Finin2min - Section 21A in 2 minutes

Legal effectSection 21A permits RBI to transact State Government business when RBI and the State Government enter into the statutory agreement.

Operative ruleThe agreement may cover receipt, collection, payment and remittance of State Government money and management of State public debt on agreed terms.

Connected lawUnlike Central Government business under Sections 20-21, the State route depends on the agreement contemplated by Section 21A.

File evidenceA State treasury review should identify the operative RBI-State agreement, designated agency banks and the scope of functions delegated.

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 21A permits RBI to transact State Government business when RBI and the State Government enter into the statutory agreement.

Operative limb

The agreement may cover receipt, collection, payment and remittance of State Government money and management of State public debt on agreed terms.

Legal boundary

Unlike Central Government business under Sections 20-21, the State route depends on the agreement contemplated by Section 21A.

Worked practical example

Facts. A State department cannot rely on Section 21A alone to compel a service that lies outside the RBI-State agreement or applicable agency arrangement.

Compliance points and common mistakes

Do not decide the issue from the heading alone. Map the facts to the operative words of Section 21A and to each relevant subsection, clause, proviso or explanation shown above.
Keep the statutory question separate from the operational overlay. Unlike Central Government business under Sections 20-21, the State route depends on the agreement contemplated by Section 21A.
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Where the provision is historical, omitted or repealed, state that status prominently and do not present it as a current compliance obligation.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 21A 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 21A?

Bank to transact Government business of States on agreement: Section 21A permits RBI to transact State Government business when RBI and the State Government enter into the statutory agreement.

Which statutory limb should be checked first?

Scope - Section 21A permits RBI to transact State Government business when RBI and the State Government enter into the statutory agreement.

What is the next legal boundary?

Operative limb - The agreement may cover receipt, collection, payment and remittance of State Government money and management of State public debt on agreed terms.

What record should support the conclusion?

Section 21A file evidence: A State treasury review should identify the operative RBI-State agreement, designated agency banks and the scope of functions delegated.

Primary sources

Source control for Section 21A: 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.