Treasury Single Account helps government save 10,000 cr in interest charges

The government has managed to save about ₹10,000 crore in interest charges in the financial year 2021-22 (FY22) using a new accounting mechanism that aims to release funds for government programs “just on time”.

Finance Secretary TV Somnathan revealed this on the sidelines of an event held to launch the Single Nodal Agency (SNA) Dashboard by Finance Minister Nirmala Sitharaman. The scorecard is part of a public finance management reform that was launched in 2021 regarding the way funds for centrally sponsored schemes (CSS) are released, disbursed and monitored.

“About ₹4.46 million rupees goes through the programs sponsored by the center and it is not a small sum. Today we are able to track this money. It is a huge success in making governance transparent. This amount of money is also sent just in time. What better realization of value for every rupee disbursed,” Sitharaman said, while launching the dashboard.

Under the new system, each state must identify and designate an SNA for each plan. All funds for this State in a particular program will be credited to this bank account, and all expenditures will be made by all other implementing agencies involved in this account. It ensures that the allocation of funds to the states for CSS is done in a timely manner and after fulfilling various stipulations. Stating that “just in time” are the three magic words of remittance, she said the SNA would facilitate payments.

Reduced expenses

Somanathan said this system would help reduce interest expenses because the money would be released when it is needed. “If the money is stuck somewhere, we would like to minimize what is stuck and keep it where it is most effectively held. I would like to pay as little public money as possible in interest,” he said.

The SNA and the TSA (Treasury Single Account) help us to minimize the interest charges borne by the government and this is not a negligible cost. “It helps us a lot, especially in a difficult year like the current financial year. These are extremely useful in containing the budget deficit as much as possible,” he said.

Later, a senior government official said that with the help of a new mechanism, states had over ₹1.20 crore in unspent balance as of March 31, 2022. “This means we had to borrow less “, he explained.

What is ASD

Previously, after approval, funds were allocated and disbursed to various ministries, departments, autonomous bodies and states. This system needs to be changed because the funds were unused and lay idle in bank accounts, while the government had to borrow and incur interest. As a result, TSA was designed.

According to an International Monetary Fund (IMF) working paper, the TSA is a unified structure of government bank accounts that gives a consolidated view of government cash resources. Based on the principle of one treasury and one treasury, a TSA is a bank account or a set of linked accounts through which the government makes all its receipts and payments. The principle of unity derives from the fungibility of all species, regardless of their end use. Although it is necessary to separate out individual cash transactions for control and reporting purposes, this is achieved through the accounting system and not by holding/depositing cash in transaction-specific bank accounts. This allows the Treasury to decouple liquidity management from transaction-level control.

Published on

June 07, 2022

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