Improvement in
Fund Flow of Rural Development Schemes
Statement of Problem:
All major
schemes in ministry of rural development are centrally sponsored schemes. These
schemes are implemented by state government departments or their implementing
agencies. As per government of India directions, funds for the centrally
sponsored schemes are transferred through state treasury. Generally state
treasury transfers fund to the implementing agencies in their account which is outside
the state consolidated fund. From this account, fund is transferred to
beneficiary or intermediary agency account. This agency may also have separate
account. All these agencies and their banks retain the funds and maintain
the float at the cost of Government of India. In this pre-funded model, every
intermediary is benefitted and rewarded for being inefficient. Banks tend to
park money. Failed transactions also offer them float. Late payment or failed
payment is a gainful proposition. There is no incentive for timely payments or
innovation to make payment fast and better.
Solution:
Thus, to
eliminate these intermediate stages and avoid useless blockage of funds,
reimbursement model may be tried. Rather than following pre-funded model,
this model will improve efficiency is fund management and disbursement. Payments from
GoI to states are done under reimbursement model. Pre-funding is there once
fund has moved out of state treasury. Under this reimbursement model, fund
transfer orders would move from Government of India accredited bank to state
nodal account and from there to destination bank. Actual funds would not move.
Once these fund transfer orders are effected, concerned banks would be paid
through settlement route. Since banks would be out of fund, some transaction
fee may be considered in the manner it is paid to accredited banks by Government
of India.
As per this model,
banks would release payment to beneficiaries as per the FTO or payment orders
and then for the same FTO, on reverse confirmation, payment will be transferred
by the accredited bank.
Benefits:
This would help
us in ensuring that
1. Beneficiaries
are paid by the bank and then they raise their claim. Thus beneficiary is at
the center stage.
2. Once FTO
reaches the destination bank, bank makes payment and goes out of fund. Thus it
becomes their responsibility to claim funds back from the govt. Banks would,
therefore develop their systems in such a manner that they get back their
reimbursement at the earliest. This will eliminate the problem of late
reporting by the banks or delayed payments.
3. Tracking of
failed transactions would become easier. There will be cases of failed response
but no failed transaction. Thus government will not be out of funds for the
cases where money did not reach to the beneficiary.
4. If files are
sent to the banks for release of payments, they will validate it quickly and
release payment. They will not get any incentive for not taking action on the files
of fund transfer orders.
Way Forward:
- SLA for performance
standards may also be devised for better performance.
- The cases where bank is
not able to seek reimbursement in 3-5 days, they shall be mandated to
report. If they fail to report this as failed transaction then these shall
be treated as rejected and any payment made by bank in such cases shall be
cost to the bank and not reimbursed.
- Banking arrangements
need to be documented and guidelines prepared for transfer from Govt to
accredited bank, from accredited bank to nodal bank and from nodal bank to
destination bank.
- Banking shall be left to
banks. We should focus on frameworks and intended service levels as well
as benefits expected from the banks.
- Every bank
account of MGNREGA worker shall get a commission on transaction as the
case at present. But once the Mgnrega worker gets skilled or self-employed,
any inflow from Govt to such account shall get higher incentive to service
the skilled worker or entrepreneur. Banks would therefore be encouraged to
lend to such accounts.
No comments:
Post a Comment