An Approach to reduce Idle Funds: A case study of Government Accounts in Public Sector Banks in Ghazipur, Uttar Pradesh, India[1]
1. Background
Public Financial Management System (PFMS) was developed as a tool to improve the payment and accounting and also reduce the parking of funds with the implementing agencies. Government of India (GoI) has made consistent efforts for complete implementation of PFMS in all its schemes both; Central Sector as well as Centrally Sponsored Schemes. All agencies operating government schemes are expected to be registered on PFMS with their dedicated bank account meant for the transactions of government business of the concerned scheme. Data of the unspent balances for the registered agencies is available on PFMS system. Though there are gaps in data and it may not be termed as comprehensive, it indicates that a huge amount of funds is lying in the bank accounts. There may be further balance lying in term deposits and bank accounts not registered in PFMS. Further, there are accounts with bank balances, which are not in the radar of even the senior state officials. These funds may be brought back to the treasury account and put to better use. The country is already facing resource crunch and such idle funds not getting leveraged is very disappointing and reflects poorly on the financial management. All efforts need to be made to identify idle funds, bring it back to the treasury of concerned government and use it in a more effective manner.
2. Data Collection
PFMS on line data was used and data was also collated from field offices. On close examination of the government accounts in only one district, it is observed that more than Rs.283 cr were lying in different accounts maintained by several state implementing agencies. After getting the bank account details their balances were confirmed and reconciled through the agencies and banks. Out of the list of accounts, dormant and inactive accounts were identified and confirmed. All identified bank accounts had some balances and these balances were confirmed along with the Government Sundry account balances and any other sundry balances lying with the concerned bank. In the process, it emerged that amounts are lying in the sundry accounts of the banks also. Further, there were accounts which were closed but still reflected as active in the records. Similarly, there were accounts which are inactive or dormant for a long time and there is no transaction taking place from them. Sundry account balances were confirmed from the regional headquarters of the bank concerned.
3. Analysis and Observations
Pilot was conducted in December 2019 in one district of rural India namely Ghazipur. Some facts were as under :
· 1850 accounts with the balance of Rs.2.83 billion identified which are related to various State and Central schemes implemented in Ghazipur.
· Out of 1850 accounts, 1442 accounts with a balance of Rs.943.5 million are related to Central Schemes. Further analysis showed that 8 accounts with a balance of Rs.199.2 million are related to Department of Drinking Water and Sanitation (DoDWS) and Ministry of Panchayati Raj (Local Government) (MoPR).
· A list of agencies and respective accounts registered for the Central schemes of Ministry of Rural Development (MoRD), DoDWS and MoPR implemented in Ghazipur were extracted from the PFMS reports. There were 66 accounts with a balance of 846.7 million which are related to the central schemes of MoRD, MoDWS and MoPR.
· Further analysis revealed that there are gaps in both the lists of accounts generates through PFMS and sourced locally from the field offices through the state officials and banks.
· It was also noticed that there were 15 inactive accounts, 155 dormant accounts out of the list provided by State.
4. Findings
From the analysis, it is apparent that huge amount of funds is lying idle in the bank accounts. In one district alone an amount of Rs.2.83 billion is lying primarily in idle or transitory accounts. In India, there are more than 700 similarly placed districts. Thus, it is estimated that about Rs.2 trillion is lying in either in an idle or unproductive manner.
5. Way Forward
Keeping federal structure and sensitivity of financing of the schemes, what could be the way forward to handle this problem of idle funds with the help of PFMS?
a. Short term measures to bring the idle funds to main treasury account?
b. Medium Term measures to look at the root cause
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