DGBA.GAD(MC)No.H- 1076 /31.05.001/2003-04, Dt. 16/04/2004
Master Circular on Reserve Bank's Role as Banker to State Government
The Reserve Bank of India has been issuing various instructions relating to Reserve Bank's role as Banker to State Government from time to time. In order to enable the banks to have all the currently operative instructions on the subject at one place, a Master Circular has been prepared which is enclosed.
2. Please acknowledge receipt of this Master Circular.
Yours faithfully,
(R.C. Das)
General Manager
Encl : As above
Master Circular
State Government TransactionsI. Introduction
The Reserve Bank of India acts as a banker to the Central and State Governments in terms of the provisions of Sections 20,21 and 21 A of the Reserve Bank of India Act, 1934. The Reserve Bank carries out the general banking business of the governments through its own Offices and branches of public sector banks viz., State Bank of India, its associates and Nationalised Banks and four Private Sector Banks viz. ICICI Bank Ltd., HDFC Bank Ltd., IDBI Bank Ltd. and UTI Bank Ltd. The business of State Government is done by the RBI and Agency Banks by means of an agreement entered into between the State Governments , RBI and Agency Banks. DGBA has issued eleven circulars in connection with the conduct of State Government Business by the Agency Banks.
II. Powers to Regional Offices to permit accredited agency banks' branches to conduct State Government business
The proposals from State Governments for entrusting State Government cash business at the treasuries/sub-treasuries to agency bank branches, are considered by Central Office at present. With a view to bringing about better co-ordination between RBI Offices and State Governments, it has since been decided to delegate powers to the Regional Offices to permit accredited agency banks branches for the conduct of State Government cash business subject to certain conditions.
a. There should be a specific proposal from State Government to handover Treasury/sub-treasury cash business to the branch of a agency bank accredited to handle State Government business. Such proposals should be supported with information as per "Annexure"
b. The agency bank should be an accredited bank for conducting State Government business.
c. one treasury/sub-treasury-one bank branch principle should be followed while according permission.
d. The accredited bank should be willing to take over Cash business of the treasury/sub-treasury concerned . For this purpose, the matter may be taken up with the Government Accounts Department of the agency bank concerned.
e. This is applicable only to State Government business and the bank branches within the State jurisdiction and that too of public sector banks only.
f. List of authorized branches will be maintained by Regional Offices.
Where the bank proposed by the State Government is not already accredited to handle the cash business of the State Government concerned, such proposals should be referred to DGBA, CO, with full particulars. Subsequent authorization of branches of the bank once accredited may be done by Regional Office concerned. List of banks presently accredited to conduct State Government business (State-wise) is given in the Annexure.
(Ref.Circular No. 145 dated May 23, 2001 DGBA GAD.No. 1099 / 31.02.041 dated May 23, 2001)
Agency banks were also advised in the matter on the above lines.
(Ref. Circular No. 146 dated May 23, 2001 DGBA.GAD.No. 1100 / 31.02.041 / 2000-01 dated May 23, 2001)
NAMES OF AGENCY BANKS AUTHORISED TO CONDUCT STATE GOVERNMENTS BUSINESS IN VARIOUS STATES| Sr. No. | Name of the State | PAD RBI Office | Agency Banks |
|---|
| 1. | Arunachal Pradesh | Guwahati | State Bank of India |
| 2. | Manipur | Guwahati | State Bank of India
UCO Bank
United Bank of India |
| 3. | Assam | Guwahati | State Bank of India
United Bank of India
UCO Bank
Central Bank of India |
| 4. | Mizoram | Guwahati | State Bank of India |
| 5. | Meghalaya | Guwahati | State Bank of India
United Bank of India |
| 6. | Tripura | Guwahati | State Bank of India
United Bank of India |
| 7. | Nagaland | Guwahati | State Bank of India |
| 8. | West Bengal | Kolkata | State Bank of India
United Bank of India
Central Bank of India |
| 9. | Kerala | Thiruvanantha-puram | State Bank of India
State Bank of Travancore |
| 10. | Bihar | Patna | State Bank of India
Central Bank of India |
| 11. | Uttar Pradesh | Kanpur | State Bank of India
Allahabad Bank |
| 12. | Madhya Pradesh | Nagpur | State Bank of India
State Bank of Indore |
| 13. | Goa | Mumbai | State Bank of India
Union Bank of India
Central Bank of India
Bank of India |
| 14. | Gujarat | Ahmedabad | State Bank of India
Central Bank of India
State Bank of Saurashtra
Bank of Baroda
Dena Bank
Bank of India
Allahabad Bank |
| 15. | Maharashtra | Mumbai | State Bank of India
UCO Bank
State Bank of Hyderabad
Bank of India
Union Bank of India |
| 16. | Tamil Nadu | Chennai | State Bank of India
State Bank of Mysore
State Bank of Travancore
Indian Bank |
| 17. | Karnataka | Bangalore | State Bank of India
State Bank of Mysore
State Bank of Hyderabad
Syndicate Bank
Canara Bank
Central Bank of India
Union Bank of India |
| 18. | Himachal Pradesh | Chandigarh | State Bank of India
State Bank of Patiala
Punjab National Bank
UCO Bank
Central Bank of India |
| 19. | Haryana | Chandigarh | State Bank of India
State Bank of Patiala
Punjab National Bank
UCO Bank
Central Bank of India
Oriental Bank of Commerce
Allahabad Bank
Syndicate Bank |
| 20. | Punjab | Chandigarh | State Bank of India
State Bank of Patiala
Punjab National Bank
UCO Bank
Central Bank of India
Bank of India |
| 21. | Rajasthan | Jaipur | Bank of Baroda
State Bank of India
Punjab National Bank
Central Bank of India
State Bank of Bikaner & Jaipur |
| 22. | Andhra Pradesh | Hyderabad | State Bank of India
State Bank of Hyderabad
State Bank of Mysore
Syndicate Bank
UCO Bank
UTI Bank Ltd. |
| 23. | Orissa | Bhubaneswar | Allahabad Bank
Bank of India
Canara Bank
Central Bank of India
Indian Bank
State Bank of India
United Bank of India
UCO Bank |
| 24. | Chhatisgarh | Nagpur | State Bank of India
State Bank of Indore |
| 25. | Uttaranchal | Kanpur | State Bank of India
Allahabad Bank |
| 26. | Jharkhand | Patna | State Bank of India
Central Bank of India |
I. Customer Service to Central and State Government as their bankers-Public Accounts Department
With a view to assessing the level of customer satisfaction rendered by the Bank and its agencies in their role as banker to Governments in the light of all-round technological developments taking place at RBI, Agency banks and Government Departments and to make the working of the Departments concerned in the Bank more customer friendly with simplified practices and procedures, four Study Groups, one each at Bangalore, Chennai, Hyderabad and Nagpur Offices comprising officials from the Bank, agency banks and various ministries/Government Departments were constituted. The Groups have since submitted their recommendations and the same have been accepted by Bank.
The action points and the time-frame for implementation of the recommendations are given below:
| Sr.No. | Action Points | Time-frame for implementation by Regional Offices |
|---|
| 1 | Tele-banking should be provided at PADs (link offices of the agency banks) so that the Government will be in a position to have the information of the Government business through that as and when it is needed. | Offices may install the necessary facilities, in consultation with concerned Government Departments.
(Action : immediate) |
| 2 | Personal Ledger Accounts, which are not operative for three years, should be closed by the Government or PAD should close the accounts after giving notice to the Government Departments and the concerned drawing officer. | Offices may identify such in-operative accounts and close the account after giving sufficient notice to Government Departments
(Action : by June 2002) |
| 3 | Discontinuance of Non-MICR instruments
For overall efficiency and improving customer service, Government Departments should desist from issue of
Non-MICR cheques in centres where clearing house is conducted on MICR technology and phase out the use of NON- MICR cheques | CGA has advised vide their letter F.No.9(40)2000/TA/390-91 dated September 24, 2001 that acceptance of Non-MICR cheques at MICR Centres may be discontinued with effect from June 1, 2002. You may advise the constituents to switch over to MICR instruments by June 2002.
(Action : by June 2002) |
| 4 | Cheques system to replace bills system at Treasuries/Sub-Treasuries/Government Department | Offices to take up the issue with Government Departments locally.
(Action : by June 2002) |
| 5 | Prompt submission of Scrolls-especially to Defence Ministry | System needs to be put in place to ensure that the scrolls in respect of Ministry of Defence are sent promptly and correctly.
(Action : immediate) |
| 6 | Submission of DMS
Copies of DMS statements being sent to the accounting authorities can be provided to the concerned DDOs having accounts with PADs without much difficulty, wherever required. | Offices may contact the account holders and ask them to give an option for the purpose.
(Action : immediate) |
| 7 | Transmission of scrolls by PAD through Electronic Media | Offices may explore the possibility of sending the scrolls by e-mail and take an option from the government Department for receiving the scrolls by e-mail in addition to the regular mode.
(Action : immediate) |
| 8 | Issue of Demand Drafts to Government Departments
It should be ensured by PADs that there is no delay in getting the draft issued from DADs and timings prescribed for issue of drafts in Citizen's Charter is strictly adhered to. | PADs/DADs to adhere to time frame as per the Citizen's Charter as notified.
(Action : immediate) |
| 9 | Rounding Off of Transactions in Rupees | Offices may reiterate the instructions (relating to rounding off of transactions) immediately and keep repeating the instructions once in a quarter for the next one year. Use of RBI's web site for reiterating the instructions can also be made.
(Action : immediate) |
| 10 | Collection of Clearing House charges from Postal Department | Standing instructions may be obtained from Postal authorities for debit of their account towards clearing charges payable by them.
(Action : immediate) |
| 11 | Arrangements for receipt of late tender of Cash by Government Departments
The working hours of PAD/Banking (Cash) may be extended suitably to ensure remittance of cash by Railways/Postal Departments by suitably staggering the duty hours of the staff concerned/introducing suitable shift system | The circular instructions issued by Central Office in this regard may be adhered to :
i. TRB No.40/89-62/63 dated October 1962.
ii. PRS (1) No.679/153-67/68 dated April 1, 1968; and
iii. PPD No.1260/RII CP 194 (3) 81/82 dated March 20, 1982
(Action : immediate) |
| 12 | Payment to Sikkim and Jammu & Kashmir Governments –
These states do not have an account with Reserve Bank of India; the payments to be made by the Ministry of Finance, Government of India and other Departments are through Demand Drafts. It should be possible to make such payments through ECS/EFT | Arrangements may be made in consultation with bankers to both these States (Sikkim and Jammu & Kashmir ) to ensure that payments to them are made by Ministry of Finance, Government of India, through ECS/EFT. New Delhi Office of RBI may examine this issue in consultation with Government Department.
(Action : immediate) |
| 13 | Extension of time limit for settlement in CAS. | CAS may extend the time limit now allowed for Settlement of funds by Link Cells of agency banks at Nagpur upto 2.30 p.m. from existing limit of 12.30 p.m.
(Action : immediate) |
| 14 | Settlement of Discrepancies in Defence Ministry Accounts at CAS | Concerted efforts need to be made by CAS for settlement of these discrepancies. Although CAS can only act as a nodal agency in settling discrepancies that have arisen because of non availability of records of Agency Banks/PADs and the respective Defence Accounting units, they may assist the parties in reaching mutually acceptable solution. |
Further, in view of the enormous work of Government and complexities and inter linkages between the Governments and the banking system besides public interface, Offices have been advised to set up formal review mechanism in the form of a Standing Advisory Committee with the Regional Director as Chairman. Such a Committee should comprise representatives of Government Departments (Central and State ) and Agency Banks as members. The Committee should meet once a quarter on an ongoing basis to look into/identify problems (both procedural and system) concerning conduct of Government accounts and sort out issues. The Committee may also suggest to Central Office matters of all India importance as inputs for policy formulation in relation to conduct of Government business.
(Ref i) DGBA.GAD.No. 904 / 31.05.001 (C) 2001-02 dated April 23, 2002
ii) DGBA. GAD.No. H-941 / 31.03.001 / 2003-04 dated March 23, 2004)
II. Overdraft Regulation Scheme-Repayment of State Development Loans/interest payment during the period of suspension
It has been decided that payment of interest and redemption value of State loans should be made even if payments of the State Government concerned are suspended under the Overdraft Regulation Scheme.
(Ref.DGBA.GAD.No.1084/31.30.076/2000-2001 dated May 19,2001)
III. Limiting acceptance of cash at cas Counters of RBI-Credit of Government Account
Some of the Offices of the Bank have fixed a limit for acceptance of cash over the counter towards payment of taxes and other dues to Government. The matter has been reviewed in consultation with our Legal Department who have examined the issue in totality and opined that keeping in view the provision of Section 40 A (3 of the Income Tax-Act 1961 read with Rule 6 DD of the Income Tax Rules, 1962, limiting acceptance of cash tendered over the counter together with the challans for credit to the Government account would run counter to the Statutory provisions, which requires cash tendered by members of Public to be accepted by Reserve Bank without any cap.
(Ref.DGBA.GAD.No.H-761/31.05.001/2003-04 dated February 16, 2004)
VI. Submission of Date-wise Monthly Statement
As per provisions contained in para 8.2 of PAD Manual, the Date-wise Monthly Statement(DMS) should be submitted to the Treasury/Sub-Treasury in all cases on the first working day of the following month. The latter will scrutinize the DMS and one copy thereof is required to be returned expeditiously within a period of 3 days from the date of its receipt to the branch of agency bank with a certificate to the effect that it has been checked and found to be correct.
Since RBI is acting as banker to the Government Departments, it has been decided to incorporate the following legend for obtaining confirmation of balances from Government Departments in the said statement at the end of the statement.
"The balance in your account as on …………as shown in the statement may please be confirmed by returning the enclosed DMS to us duly filled in and signed by the authorized officials. If the certificate is not returned within one month from the date of this statement, it will be presumed that the balance shown therein has been confirmed and no further correspondence will be entertained thereafter ".
(Ref.DGBA.GAD.No.H-762/31.04.001/2003-04 dated February 17, 2004)
VII. Settlement of March transactions with Central Accounts Section(CAS), Nagpur-Financial Year 2003-04
The Government transactions relating to each Financial Year are required to be accounted for in the same Financial Year to the extent possible. Procedure to be followed for settlement of March-end transactions are issued to all Agency banks and RBI Offices in the month of February each year.
(Ref. i) DGBA.GAD.No. 998/ 31.04.001 / 2003-04 dated February 18, 2004
ii)DGBA.GAD.No. 772 / 31.04.001 / 2003-04 dated February 27, 2004.)
VIII. Accounting and Reconciliation of State Government Transactions
In the light of discussions in the Conference of State Finance Secretaries held in May, 2001, a high level Committee under the Chairmanship of Shri A.K. Sohani, Regional Director, Reserve Bank of India, was constituted to examine, review and suggest changes in the existing accounting and reporting mechanisms for State Government transactions with Reserve Bank and its Agency banks, and to suggest methodology for reconciliation of pending discrepancies in accounts with an acceptable system of confirmation of balances. Members of the Working Group were drawn from the Office of Comptroller and Auditor General of India, Office of the Controller General of Accounts, Finance Departments of a few State Governments and Accountants General Offices besides officials from Reserve Bank of India and State Bank of India.
The Report of the Working Group was placed before the 10th Conference of Finance Secretaries held on June 7, 2002 and was adopted for implementation. The Working Group is of the view that the system and procedure outlined in the existing "Scheme of Partial Decentralisation" introduced in 1987 are broadly adequate to meet the accounting and reporting requirements and that the present problems have arisen mostly due to inadequacies and lags in the implementation of the Scheme by the parties involved. some of the major recommendations of the Working Group are briefly recapitulated below :
a. It was observed that the use of Pass-Book System was not being followed at present. The Group appreciated the utility of Pass-Book System and recommended that the Agency Bank branch to maintain two sets of Pass-Book in the revised format (which includes certificate of confirmation by Treasury / Sub-Treasury Officers) for alternate day use, so that one full day is available to Treasury / Sub-Treasury for verification. Certificate regarding correctness of the transactions after verification of each item of receipt and payment recorded in scrolls is to be given in the Pass-Book itself.
b. In view of persistent delay in remittance of collection to the government account, a deterrent provision for payment of interest at two percentage points above the Bank Rate may be charged on delayed receipts of Rs. 10 lakhs and above, if the period of delay exceeds the prescribed time (at present the prescribed time is 10 days for normal branches and 15 days for the branches situated in far flung areas) for crediting such transactions. The prescription in regard to period is to be reviewed after one year in the light of the procedural improvement and impact of computerisation at bank branch level.
c. In future, the Accountant General may give confirmation to the Central Accounts Section (CAS), Nagpur on item-wise Cash Balance during the month within fifteen days of the reporting of the balances by the CAS. Apart from the monthly reconciliation, there should be a system of confirmation of Annual Cash balance of State within two months from date of receipt of figures.
d. All Agency bank branches handling Government business on one side and Treasuries on the other should move towards centralized maintenance of accounts and processing. Accounting when centralized, reduces cost of operations, ensures availability of up-to-date information and improves management, paving the way for uniformity in standards. The concerned functionaries should gradually move towards the centralized system of maintenance of accounts and processing.
e. Efforts should be made to switch over progressively to the cheque payment system, replacing the bill payments system existing in some States. This will minimize the movement of bulky documents and also facilitate easy capture of data.
f. It would be desirable, to have an electronic link between the Accountants General offices and Public Accounts Departments of Reserve Bank of India on the one hand and Accountant General Offices and the CAS on the other, for better and speedy cp-ordination. All the parties should make efforts to share their data electronically, duly ensuring transparency, correctness and security of data.
(Ref.DGBA,GAD.No. 1377 / 31.04.008 / 2002-03 dated February 22, 2003).
X. Induction of four Private Sector banks for Government business
RBI has authorised four private sector banks viz. ICICI Bank Ltd., UTI Bank Ltd., IDBI Bank Ltd. and HDFC Bank Ltd. for conduct of Government Business including State Government Business such as revenue collections, pension payments, expenditure related functions in respect of all Central Government Ministries/Departments. The authorization is subject to banks continuing to maintain certain critical financial parameters on an on-going basis. The effective date for commencement of collection of direct taxes and pension disbursement work for Government of India is October 1, 2003.
Further, these four banks are required to remit their Government collections to CAS, Nagpur within 3 days (inclusive of holidays) of realization of cheques etc. The collection of the banks is governed by the instructions contained in the "Memorandum of Instructions - Accounting and Reconciliation - State Government Transactions" issued by Reserve Bank of India under cover of its Circular DGBA.GAD.No. 1377 / 31.04.008 / 2002-03 dated February 22, 2003, and procedures laid down by Accountant General. All State Governments have been advised that if they so desire they can choose any or all the Four Banks for conduct of the State Government's business including disbursement of pension.
(Ref.DGBA.GAD.No. 229 / 42.01.001 / 2003-04 dated August 29, 2003)
In case any clarification is required, a reference may be made to the original circular.
Master Circular
List of Circulars consolidated by the Master Circular| Circular DGBA.GAD. No. | Date | Subject | Para No. |
|---|
| Circular No.145 1099/31.02.041/2000-01 | 23.5.2001 | Powers to RD/GM/to permit accredited agency banks branches to conduct State Government cash business | II |
| Circular No. 146 1100/31.02.041/2000-01 | 23.5.2001 | Authorisation to RD/GM to permit accredited agency banks branches to conduct Specific State Government business | II |
904/31.05.001/2001-02
H-941 / 31.03.001 / 2003-04 | 23.4.2002
23.3.2004 | Customer Service to Central and State Government as their bankers-PAD Recommendations of the Study Group-Implementation of Action Points | III |
| 1084/31.30.076/2000-01 | 19.5.2001 | Overdraft Regulations Scheme-repayment of State Development Loans / interest payment during the period of suspension-Payment of interest and redemption value man be paid during the imposition period. | IV |
| H761/31.05.001/2003-04 | 16.2.2004 | No limiting of acceptance of cash at cash counters at RBI for Credit to Government Accounts | V |
| H762/31.04.001/2003-04 | 17.2.2004 | Submission of Date-Wise Monthly Statements-Treasuries and sub-treasuries | VI |
| 772/31.04.001/2003-04 | 27.2.2004 | Statement of March transactions with CAS, Nagpur-Government transactions relating to the year are required to be accounted for in the same financial year. | VII |
| 998/31.04.001/2003-04 | 18.2.2004 | Conduct of state Government business by agency banks- | VII |
| 1377/31.04.008/2002-03 | 22.2.2003 | Accounting and reconciliation of State Government accounts-The Report of the Working Group on accounting and reconciliation of State Government transactions with agency banks-recommendations of AK Sohani Committee | VIII |
| 229/42.01.001/203.04 | 29.8.2003 | Induction of four Private Sector Banks for conduct of Government Business. | IX |
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