Parking of Funds and Personal Ledger Account PLA

 Parking of Funds and Personal Ledger Account PLA

-Dr. Lalit Kumar

The Government Departments, Boards, Corporations usually receive funds/grants/money from parent departments, finance departments, other state governments, central government, national and international financial institutions, etc., and the amount is usually deposited in a saving bank account for safety purposes. The bank provides nominal interest on the savings account. Whenever the Government audit the financial records relating to cash including cash at treasury and bank balance, it becomes difficult to detect the irregularities as the bank account is easier to use for non-government purposes. The cash at treasury is used strictly with vigilance on part of Treasury Officer w.r.t. sanctions, approvals, rules, instructions, etc.

Loss of interest to Government

Secondly, the amount deposited in the bank receives nominal interest. In case, such an amount is kept in treasury, the Government can utilize it for the time period it is not spent. The debt of the Government will reduce and the cost of debt service will be reduced. 

Illustration

For example, a government department received Rs. 10 crores for a particular project from UNDP, and the amount is deposited in a savings bank account. Suppose the amount is used within 6 months and the rate of interest is 4% on the saving account. The department will earn interest on Rs. 10 Crores, an amount of Rs. 20 Lacs. At the same time, the Government took a debt of Rs. 10 Crores from the same bank to finance its requirements. Suppose the bank is charging interest on loan 8%. The Government will pay interest on Rs. 10 Crores loan for 6 months, an amount of Rs. 40 Lacs.

In case, the department would have kept the amount Rs. 10 Crores in Treasury, the Government would have saved net Rs. 20 Lacs (i.e. Rs. 40 Lacs paid to the bank – Rs. 20 Lacs earned as interest on deposit from the bank). 

What can be the solution to this problem

Is it possible to keep such an amount in treasury instead of a bank? Can Government stop the parking funds in bank accounts by the departments? Is it possible to better supervise the amount received from external departments, other state governments, central government, national and international financial institutions to get the maximum benefit out of it?

Since the opening of a Saving/Current Bank Account can easily lead to misuse of funds/money as the treasury officer has no control over the bank account.

Personal Ledger Accounts (PLA)

Yes, it is possible by using Personal Ledger Accounts (PLAs) which are maintained at the level of treasury officer. An amount deposited in PLA remained in the hands of the Government, before each withdrawal from this account, the concerned treasury officer can control misuse of the amount because the Financial Rules state that money can only be drawn from Treasury as and when there is an urgent requirement for disbursement. The sanctioning powers are in the hands of concerned departments while the amount stays in the hands of concerned treasuries. The Drawing and Disbursing Officer (DDO) can draw the funds/money only when it becomes essential to disburse and with digital payments, now the amount is directly transferred to the accounts of payees.

*Copyright © 2021 Dr. Lalit Kumar. All rights reserved. 

This article is written by Dr. Lalit Kumar Setia; a renowned author and trainer. He completed his Doctorate in Commerce from Kurukshetra University Kurukshetra and MBA in Information Technology from GJU, Hisar. He also wrote two books, 15 research papers, and organized more than 200 Training Courses during his working period since 2006 in Haryana Institute of Public Administration, Gurugram. The article was published on 25th September 2021 and last updated on 25th September 2021. The writer can be contacted on lalitkumarsetia@gmail.com 

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