May 22, 2024
Funds

New banking norms help save interest cost for CSS fund transfers


NEW DELHI :The central government’s revamped fund transfer mode for state agencies executing centrally-sponsored schemes (CSS) is helping the Centre save interest costs, and ensuring timely funds for executing agencies. That apart, it also ensures transaction data is made available directly to policymakers at the ground level, a person aware of the impact of executing the new mode, said.

The central government’s revamped fund transfer mode for state agencies executing centrally-sponsored schemes (CSS) is helping the Centre save interest costs, and ensuring timely funds for executing agencies. That apart, it also ensures transaction data is made available directly to policymakers at the ground level, a person aware of the impact of executing the new mode, said.

The revamped fund transfer method, introduced in 2021, required states to assign a single nodal agency (SNA) for each centrally-sponsored scheme. The central funds are first transferred to the states’ accounts with Reserve Bank of India, and then to the bank account of the nodal agency.

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The revamped fund transfer method, introduced in 2021, required states to assign a single nodal agency (SNA) for each centrally-sponsored scheme. The central funds are first transferred to the states’ accounts with Reserve Bank of India, and then to the bank account of the nodal agency.

The SNA receives a quarter of centrally allocated funds for a scheme, initially, followed by further transfers when three-fourths of the already released funds are utilized, the person said on condition of anonymity.

This system has minimized instances of funds lying idle at the state level, making them available for other schemes or implementing agencies which may be in need for money. It also avoids the need for the central government to borrow for specific schemes, as funds transferred for other projects might remain unused at the state level, he added.

“The new system helps in making significant savings in terms of interest cost as funds are released to the implementing agencies according to their requirements and idle funds across agencies is minimized.”

The savings amount to several thousand crores in a year, positively impacting the fiscal deficit, the person said.

The new way of fund management also helps in monitoring the use of central funds at the ground level by various agencies, giving the Centre a bird’s eye view of where funds are getting utilized fast and what all bottlenecks are to be addressed, said the person. For the states, the new arrangement makes it easier to furnish fund utilization related documents to the Centre as all the details of the utilization of funds under one scheme would be available with the nodal agency. There is no case of the implementing agency having to wait for the Centre’s share of funds when the states concerned has already put its share to the agency’s account, the person quoted above said.

Emailed queries to a spokesperson of the finance ministry seeking comments remained unanswered till press time.

During the recent winter session, finance minister Nirmala Sitharaman had assured Parliamentarians that there has been no delay in transferring the funds to designated accounts for operating CSS. She had also emphasized the Centre’s commitment to fiscal prudence without compromising on the essential welfare spending needs.

“The moment you deposit states’ share in the single nodal account, central funds are also transferred to it,” the minister had said in Lok Sabha on 12 December.



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