The Indian government is actively developing the second version of the Public Financial Management System (PFMS) to further enhance efficiency in cash management and reduce idle funds in the banking system, according to Expenditure Secretary Manoj Govil.Highlighting the improvements already achieved, Govil noted that the reduction in public float with banks has significantly benefited the Union government’s accounts. “This has helped us in many ways, including minimising idle fund parking, improving cash management, and reducing our borrowing needs,” he explained.
Traditionally, both central and state governments held large sums of money in bank accounts, creating a float that remained idle. With the introduction of new systems, surplus funds are now directly managed within the Reserve Bank of India (RBI) instead of being parked in commercial banks.
This shift enables the government to optimise its borrowing and spending, ensuring that excess funds are not locked in unproductive accounts.“We don’t need to borrow as much as before while still ensuring liquidity for essential expenditures,” Govil added.The reforms have also been extended to state governments, which have seen a reduction in their bank floats, thereby lowering the costs associated with maintaining large, unutilised balances.(Edited by : Vivek Dubey)
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