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A single nodal agency, several benefits

The SNA model requires the states to notify an SNA for each CSS which will open a unique bank account at a commercial bank responsible for all transactions related to the implementation of the particular CSS.

bad bank RBI

By Rouhin Deb

Amidst the uncertainty caused by a host of factors, ranging from the Ukraine war to the Covid-19 pandemic, the government is focussed on tapping future opportunities by going all guns blazing on capital expenditure. The impressive strike rate of 98.5% on capital expenditure, as evident from the Revised Estimates for FY22, is a testimony to the concerted efforts of the government on streamlining processes and bringing in crucial public-finance management reforms. Given the federal structure of our democracy, bringing in reforms that actually translate into better results for the states and the Centre equally has always been a challenge. One such reform that has benefitted the states and the Centre alike has been the introduction of the State Nodal Agency bank account model for transferring funds for implementation of centrally-sponsored schemes. The single nodal agency (SNA) model has significantly streamlined the disbursal of funds for Centrally Sponsored Schemes (CSS), which comprise nearly 20% of the total fiscal transfers and amount to nearly Rs 3.8 trillion. The initiative has brought down the float available in the CSS fund flow mechanism to a minimum, and improved the monitoring system when it comes to utilisation of funds. The government can now see financial activity via SNA, which is helping in effective monitoring of the expenditure by down-the-ladder agencies.

The SNA model requires the states to notify an SNA for each CSS which will open a unique bank account at a commercial bank responsible for all transactions related to the implementation of the particular CSS. All other implementation agencies will either use the SNA’s account or open a zero-balance subsidiary account, with drawing limits set by the SNA. This has led to funds for CSS now being transferred to just 3,072 bank accounts instead of the 9.77 lakh accounts previously.

The state governments, in particular, are set to benefit immensely from the shift to SNAs. By providing data on unspent balances, state government departments can now see the state-wise float available for a CSS before initiating the proposal for the fund released. Similarly, the state can also monitor and prioritise releasing new installments of funds to districts, blocks, and gram panchayats based on their utilisation of the previously allocated funds. The ability to see the transaction process end-to-end can improve the efficiency of the delivery mechanism. This will lead to faster and timely utilisation of funds on the ground. Second, since the expenditure on the CSS is made from a single account now, the submission process for utilisation certificates has become much easier for the states.

The states can now monitor the interest credited by the banks and can transfer the state-share of the interest into the consolidated fund of the state. Before the new procedure, no such mechanism was available. Also, the new mechanism today enables capturing of end-to-end transaction processes, and the performance of banks can be evaluated through key performing indicators (KPIs); SNAs can provide real-time resolution of the inefficiencies in the banking process.

For states like Assam, the introduction of zero-balance accounts has eliminated delays and ensured ‘in time’ availability of funds for the implementing agencies. This system has particularly benefitted the remotely-located implementing agencies with restricted access to the bank branches. The cumbersome process of handling cheques and bank drafts has been dispensed with; statutory deductions like payments of direct and indirect taxes by the agencies—not efficiently captured earlier—are now being fully complied with, thereby ensuring transparency and accountability.

SNAs will be instrumental in fast-tracking work-related schemes that entail infrastructure development on the ground, viz. the Jal Jeevan Mission. Accountability and accessibility to the status of funds released are much higher now. The SNA dashboard, to be released by the finance minister on June 7 as part of the Azadi ka Amrit Mahotsav, is going to enhance transparency in the whole process. The dashboard will use the extensive data to make easy comparisons among states, districts, blocks, etc, decide future releases, analyse and monitor timely release of central and state share of SNAs, study the expenditure pattern, and track the utilisation of funds at the click of a button. This will enable data-driven and better-informed decision-making.

Efforts made by the Centre and the state governments have firmly established the SNA model, which has been adopted by all the states. Reforms like these are among the primary factors driving a paradigm shift in utilisation of funds across states. So far, systemic reforms like the SNA are on the right path to bring in a bottom-up approach in the public-funds disbursal system. With time, it seems the model will be able to bring more transparency and efficiency to citizen-centric delivery mechanisms.

The writer is Chief economist, CM’s secretariat, Government of Assam, and visiting professor, Development Management Institute, Patna

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