Role of Reserve Bank of India in Government Accounting

1
Role of Reserve Bank of India in Government
Accounting
2
Session Overview

• Reserve Bank of India is the banker of the
  Government.
• Union Government and all State Governments,
  except the Government of Sikkim have entered into
  an agreement with the bank for conducting
  Government Business

3
Session Overview

• The banking business of Government is conducted
  under the Reserve Bank of India, Act 1934 and as
  per the orders/instructions given to the bank by
  Union Government
• At places where the Reserve Bank does not have
  its branch, State Bank of India performs the
  function on behalf of the former
• Reserve Bank of India holds the cash balances of
  the Government

4
Session Overview

• Central Accounts Section of the Reserve Bank of
  India at Nagpur keeps a complete account of
  Governments transactions
• Inter-Government transactions are also affected
  by the Reserve Bank of India on the advice of
  designated authorities.

5
Session Overview

• In this session we will discuss
• The role of Reserve Bank of India in Government
  Accounting
• Inter Government and inter departmental
  adjustments
• Checks and balances in the Accountants General
  Office.

6
Learning Objective

• At the end of the session, the learner will be
  able to state the role of Reserve Bank of India
  in Government Accounts, adjustment of Inter
  Government Transactions, and adjustment of the
  outstanding suspense balances under final heads.

7
Role of Reserve Bank of India

• Banking business of Government like
• Receipt of moneys on behalf of the Government
• Holding of cash balances
• Ways and means advances to the Governments to
  tide over temporary liquidity problems
• Investment of surplus cash as per directions of
  the Government.

8
Role of Reserve Bank of India

• The Union Government and all the State
  Governments (except the Government of Sikkim)
  have entered into an agreement with the RBI to
  conduct their banking business

9
Role of Reserve Bank of India

• Ministries and Departments of Central Government
  shall operate on such offices/branches of the
  Reserve Bank or of the bank as have been or may
  be nominated for handling the receipt and payment
  transactions of the particular ministry or
  departments.

10
Role of Reserve Bank of India

• The Transactions of Railway, Posts,
  Telecommunications and Defence Department arising
  at RBI and SBI, acting as an agent of RBI, shall
  be distinguished from the Central Transactions in
  the initial accounts and classified separately.

11
Role of Reserve Bank of India

• Similarly, each office or branch of the RBI or
  the SBI acting as an agent of the RBI, shall keep
  a separate accounts of cash transactions
  undertaken by it on behalf of the State
  Government within whose area it is situated.

12
Role of Reserve Bank of India

• Statement of these transactions together with all
  supporting vouchers, challans, paid cheques etc.
  is forwarded by each office and branch of the RBI
  daily to concerned PAOs, Railways, Defence, Post,
  Telecommunication Department, Treasury Officers.
  These transactions are also reported to the CAS
  of the RBI, Nagpur daily through designated link
  offices.

13
Account of the Central Government with the Bank

• Ministries and Departments of the Central
  Government shall, as a rule, operate on such
  offices and branches of the Reserve Bank and or
  of a designated scheduled bank, as have been, or
  may be nominated for handling the receipt and
  payment transactions of the particular Ministry
  or Department.

14
Maintenance and submission of Accounts

• Each office or branch of the RBI or bank handling
  transactions of the Ministries/Departments of the
  Central Government shall maintain separate
  accounts in respect or each Ministry and
  Department banking with it and render an account
  of the transactions to the PAO of the concerned
  Ministry and, or Department, at such intervals as
  may be prescribed by the Government, together
  with all the supporting challans, paid cheques.

15
Maintenance and submission of Accounts

• These transactions shall also be routed through
  the banking channel prescribed by the RBI, to
  facilitate their incorporation in the books of
  the RBI, CAS, at Nagpur, which is responsible for
  keeping a complete account, of receipt and
  payments (including inter-Governmental
  adjustments and adjustments inter-se of Defence,
  Railways and Posts- other than Telecommunications)
  on account of the Central Government.

16
Statement of Closing Balances

• A statement of the closing balance of the Central
  Government shall be sent each month, by the CAS
  of the RBI to the Controller General of Accounts,
  indicating
• (i) Central Government Account Balance (in
  respect of Central transactions and Union
  Territory Administrations dealt with by
  Accountants General and of all Union Territory
  Governments with Legislature)
• (ii) Railway Fund Balance

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Statement of Closing Balances

• (iii) Postal Account balance
• (iv) Telecommunication Account Balance
• (v) Defence Account Balance
• (vi) Departmentalized Ministries Account Balance
  (which also includes transactions of Union
  Territories of Delhi and Andaman and Nicobar
  Islands whose accounts have been separated)
• (vii) Total

18
Monthly statements

• The CAS of RBI shall maintain individual accounts
  of various Central Government Ministries,
  Departments and of Union Territory
  Administrations having separated accounts
  offices, and send a monthly statement to their
  Principal Accounts Offices with such supporting
  details as may be prescribed by the RBI in
  consultation with the Controller General of
  Accounts

19
Accounts of State Governments with the Bank

• Each State Government has made a separate
  agreement with the RBI by virtue of which the
  General banking business of that Government is
  carried on and transacted by the Reserve Bank.
  The operations of each State shall, however, be
  confined to the offices and branches of the RBI
  and of the bank which have been designated as
  falling within the area of that particular State.

20
Accounts of State Governments with the Bank

• The receipt and payment of moneys on behalf of a
  State outside its jurisdiction shall ordinarily
  be arranged through the Accountant General of the
  State in which the transactions take place.

21
Maintenance of Accounts of Central and State
Government

• Complete accounts of the Central Government and
  of each of the State Government with the Bank
  shall be maintained by the CAS at Nagpur of RBI
  which shall also act as a General clearing house
  for the adjustment of (i) all transactions
  between different State Governments and (ii) such
  transactions between the Central and State
  governments as may be specified by the Central
  Government.

22
Inter-Govt. Adjustments

• Inter Government adjustments are necessitated due
  to
• Central Government pays share of State
  Governments in Income Tax and Central Excise
  Duties and other taxes collected by the Central
  Government for State Governments

23
Inter-Govt. Adjustments

• Grants-in-aid as per recommendations of the
  Finance Commission as approved by the Parliament
• Loans given by the Central Government to the
  State Governments
• Reimbursement of expenditure on Central Schemes
  or Centrally Sponsored Schemes executed through
  State Governments.

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Inter-Govt. Adjustments

• Similarly State Governments make repayments of
  Central Government loans, payments of interest on
  Government of Indias loan and cost of goods
  purchased through D.G.S D to Central Government.

25
Inter-Govt. Adjustments

• CAS of RBI, Nagpur after carrying out all
  adjustments occurring during the month and
  incorporating the transactions reported by the
  branches and agency banks compiles the total
  transactions for the month of that account circle
  and sends monthly closing statements of Central
  Government/State Government on 20th of the
  following month with following details -

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Inter-Govt. Adjustments

• Opening Balance
• Transactions during the month (Net of Receipts
  and disbursements)
• Adjustments in R.B.I.
• Closing Balance.

27
Procedure of Adjustments

• There are two procedures which are adopted in
  dealing with inter government transactions -
• Reserve Bank of India Advice Procedure
• Cash Settlement Procedure

28
R.B.I Advice Procedure

• The Reserve Bank of India Advice procedure is
  adopted in the following cases in the Civil
  Accountants General Offices
• Accounts of Inter State Suspense i.e.
  transactions between states inter-se
• Repayment of loans taken by State Government from
  the Central Government and payment of interest
  thereon by the State Governments to the Central
  Government/Ministries/ Departments

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R.B.I Advice Procedure

• The Special cases of pensions of retired High
  Court Judges paid through state treasuries or
  Public Sector Banks, which are under certain
  constitutional obligations/ provisions required
  to be charged on the Consolidated Fund of India
  pending recovery of equivalent amounts from the
  State Government
• Transactions connected with Reserve Bank of India
  Remittances occurring in State non-banking
  treasuries/sub-treasuries and
• .

30
R.B.I Advice Procedure

• Such other cases as may be specially prescribed
  by the President on the advice of the Comptroller
  and Auditor General.
• All transactions adjustable between State
  Governments inter-se and between a State
  Government and Central Government covered by RBI
  Advice procedure shall be initially brought to
  account in the State Section of account under the
  head Inter State Suspense or under Adjusting
  Account between Central and State Government
  respectively.

31
Separate transactions

• The transactions of Railway, Posts,
  Telecommunications and Defence Department arising
  at offices and branches of the RBI and SBI,
  acting as agent of the RBI, shall be
  distinguished from other Central transactions in
  the initial accounts and classified separately
  for each Railways, each circle of Posts, each
  Accounts Officer of Telecommunication, and each
  Controller of Defence Accounts respectively.

32
Separate transactions

• These transactions will be taken against the
  Railway Fund, Postal Account, Telecommunication
  Account and Defence Account respectively, in the
  books of the Reserve Bank.

33
Reserve Bank Suspense- Central Accounts Office

• This minor head is meant to be operated upon by
  Principal Accounts Office etc. for issuing advice
  on Reserve Bank of India, Central Accounts
  Section, Nagpur to effect transfer from the
  balances of Central Government (Civil) to that of
  State Governments (Except Sikkim Governments) in
  connection with payment of loans, grant-in-aid,
  State Governments share of Income Tax and Union
  Excise Duties etc. so as to afford debit to the
  final head of account in their books by per
  contra credit to this suspense minor head.

34
RBI Remittances

• Transactions related to the issue and payment of
  telegraphic transfers, drafts (including
  transactions relating to security deposit
  interest draft and dividend warrant payment
  credits issued by the Reserve Bank of India). On
  the Reserve Bank Account are accounted for under
  the Major Head 8782-Cash Remittances and
  Adjustments between officers rendering accounts
  to same Accounts Officer-105 Reserve Bank of
  India Remittances.
• These transactions are cleared with the Reserve
  Bank by corresponding adjustment against the
  balances of the Governments concerned.

35
Monthly statements

• in respect of (i) above to the concerned
  Accountant General (with break up of
  balances/transactions relating to Central
  Government and relating to relevant Union
  Territory Administrations) and Accounts offices
  of Union Territory Governments and in respect of
  (ii), (iii), (vi), (v) above, to the Railway
  Board, Postal Board, Telecommunications Board and
  controller General of Defence accounts
  respectively.

36
Inter-State Governments Adjustments

• All inter-State adjustments as well as all
  payments which one of these Governments has to
  make to another shall be advised by the
  Accountant General authorized in this behalf to
  the CAS of the RBI which will pass the necessary
  entries in the accounts of the Governments
  concerned, maintained in its books.

37
Other adjustments

• Similarly, such adjustments in the case of
  specified transactions between the Central
  Government and the State Governments as well as
  transactions between Defence, Posts,
  Telecommunications and Railways inter se will be
  advised to the CAS of the RBI by the authorized
  Accountant General

38
Statement of monthly closing balances

• At the close of the accounts of each month, a
  statement of closing balance of each State
  Government in the books of the Bank after taking
  into accounts all cash transactions in all the
  offices, branches and agencies of the Bank and
  the adjusting transactions in its own books shall
  be forwarded by the Central Accounts Section to
  the Accounts Officer concerned.

39
Statement of monthly closing balances

• Similarly, a statement of the closing balance of
  the Central Government comprising -
• (i) Central Government Account Balance (in
  respect of Central transactions of Accounts
  Officers and separated accounts of Union
  Territories only).
• (ii) Railway Fund Balance.

40
Statement of monthly closing balances

• (iii) Postal Account Balance.
• (iv) Telecommunication Account Balance.
• (v) Defence Account Balance.
• (vi) Departmentalized Ministries Account Balance
• (vii) Total

41
Delinking of SDLs servicing transactions from
Clearance Memos-treatment in accounts

• GA Wing of CAG of India vide Lr No
  397/GA-127/2014, dated 29.07.2015 has issued
  guidelines regarding servicing of debt under
  State Development Loans (SDLs) which have been
  transferred to Public Debt Office, Mumbai. The
  repayments of principal and interest for these
  loans are done by PDO Mumbai office of RBI and
  the Clearance Memorandum are not issued by CAS,
  Nagpur on this account.This has necessitated few
  changes in the way AG offices account for RBI
  transactions.

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Flow Chart on Banking Operations of RBI