Odisha Govt Asks All Departments to be Careful While Depositing Money in Banks

The Odisha government on Monday had asked all departments, public sector units and state agencies to be careful while depositing money in any bank without proper enquiry. The government notification to this effect went viral on social media after it was reported by a news agency and caused panic among people, leading to a clarification of sorts.

In the clarification on Friday, the government said it does not have any view on the fiscal health of any particular bank and its circular was only meant to avoid opening of new accounts and shifting welfare and developmental funds of the government from one bank to other. Interestingly, the Odisha government had been warning all departments about 'unhealthy competition among banks' while soliciting deposits and dubious strategies. The two circulars only underline that there is something wrong with how government funds are being utilised by banks leading to official action.

On 21 October 2109, AKK Meena, principal secretary of the finance department in Odisha, in the notification , had asked all departments to utilise government funds directly from treasury through the integrated financial management system (IFMS) instead of parking the money in bank accounts.

"Further, it is reiterated that withdrawal of money from treasury without sufficient grounds such as immediate need for utilisation, matching share for CSS, and depositing the same in bank accounts shall be construed as financial irregularity," the notification warns.

It says, "...adverse reports are coming in the newspapers about the fiscal health of some of these banks and apprehensions are being raised in some quarters regarding safety of the deposits in some of these banks. It is to be mentioned in this context that each depositor in a bank is insured up to maximum of Rs1 lakh for both principal and interest amount held by him the same capacity and same right as in the date of liquidation or cancellation of bank's license or the date on which the scheme of amalgamation or merger or reconstruction comes into force under deposit insurance and credit guarantee corporation of India Ltd (DICGC), a subsidiary of Reserve Bank of India (RBI)."

"...the government departments, PSUs or agencies have to be very careful while keeping deposits in any bank and proper enquiry about the financial health of the concerned bank for making any deposit. It shall be the personal responsibility of the concerned authority for such deposit," the notification says.

However, on Friday, Mr Meena issued a clarification stating that there is no reason for anyone to get apprehensive about the financial health of banks in general. The notification says, "Finance department has empanelled certain banks for transactions based on bank's performance within the state for carrying out business with government agencies only. The circular dated 21 October 2019 was only meant to avoid opening of new accounts by DDOs and shifting government funds meant for welfare and developmental activities of government without any reason from one bank to another. Further, it may be noted that the drawal of government funds from state treasury and parking the same in banks for a long period without adequate justification causes loss to the state exchequer, which should be avoided.

The Odisha government has been talking about its funds unnecessarily being parked in banks or transferred from one bank to other. A notification issued by the same Mr Meena on 4 October 2019 , talks about 'unhealthy competition among banks'. "...There has been an unhealthy competition among the banks to canvas and solicit government deposits from different departments and government entities and allegations and counter allegations are being received implicating government officers for acting in mala fide. This has resulted in a very ugly situation demanding urgent action to curb the tendency."

In July this year, Odisha government has emplaned 17 banks from the public sector, eight from the private sector, one small finance bank, two regional rural banks and one cooperative bank for handling business and deposits of state-run units and state level autonomous societies for FY2019-20.