DBOD No. Dir.BC. 29 /13.03.00/2000-01

October 6 , 2000
Ashwina 14, 1922(S)

All Commercial Banks
(including Regional Rural Banks)

Dear Sirs,

Engagement of outside agents for collection
of deposits or selling of deposit linked products on
remuneration/fees/commission basis

As you are aware, in terms of paragraph 17(d) of our Directive DBOD No.Dir.BC.151/C.347-85 dated December 27, 1985 and para 10 (c) of the directive DBOD No. Dir.BC. 95/C.347(I)-86 dated September 11, 1986, banks are prohibited from paying brokerage on deposits in any form to any individual, firm, company, association, institution or any other person.

2. It has come to our notice that some banks have appointed direct sales agents through certain companies after entering into an agreement with them for mobilization of deposits. The agents are also entrusted with a variety of functions, such as, soliciting new applicants, completion of account opening formalities including collection of photographs, filled forms and proof of residence, witnessing, notorising, etc.

3. We have examined the matter and advise that it would not be in order for banks to employ/engage outside persons even through firms/ companies for collection of deposits including Non-Resident deposits or for selling any other deposit linked products on payment of fees/commission in any form or manner, except to the extent permitted in sub-clause (i) of clause (d) of paragraph 17 of our Directive dated December 27, 1985 referred to in paragraph 1 above, as applicable to domestic deposits.

4. Accordingly, amending Directives DBOD No.Dir.BC. 27 & 28 /13.03.00/ 2000-01 dated October 6, 2000 are enclosed.

5. The following consequential amendments may please be carried out in the Manual of Instructions issued by DBOD, DBS & IECD .

6. Please acknowledge receipt.

Yours faithfully,

Encls.: As above