Outflow of Rs.600 crore to two banks

The flow of around Rs.600 crore from the government treasury to two nationalised banks during the past one year against specific directives is understood to have deepened the financial crisis gripping the State.

A Finance Department directive to contractors to deposit the earnest money deposit (EMD) of government works in the two banks; a cut in interest rate on fixed deposits in treasury savings bank; and routing the payment of salary of a section of government employees through banks have deprived the government of a substantial sumwhich was earlier left at its disposal without any financial commitment for meeting exigencies.

Finance Department sources told The Hindu here on Sunday that in the face of the cash crunch, curbs are already in place on cash payments from the treasury. Oral directions have been given against releasing payments above Rs.5 lakh at one go. The situation is likely to turn murkier within a month as the government will have to meet major financial commitments by the end of the financial year.

The decision to take away the EMD from the treasury to the banks had taken a heavy toll on the State’s finances. Administrative sanction is accorded to about 20 civil works costing Rs.1 crore and above every month. Which means the EMD of about 240 or even more works used to be deposited in the treasury every year.

The decision to slash the rate of interest on fixed deposits had prompted a sizeable number of depositors, mainly pensioners, to explore other beneficial options. When government employees were offered an option to draw their salary through banks, about 20 per cent of the gazetted officers exercised it.

Recently, it was proposed to disburse the salary and allowances of MLAs through banks, but there were not many takers for it.

There are complaints that the treasury modernisation initiative has slackened and no serious thought is being given for addressing the crisis. Expediting the networking process, raising the interest rate of fixed deposits in treasury savings bank by 0.5 or one per cent, issuing a fresh directive to retain the EMD of works costing Rs.1 crore and above in the treasury and disbursal of salary through treasury have been mooted for giving more leeway to the government to handle the crisis.