The Centre will route the funds for all centrally sponsored schemes (CSS), with an aggregated annual budget outlay of Rs 5 lakh crore, through the Reserve Bank of India platform from November instead of state treasuries, to curb the floating of funds and rein in borrowings.
At present, the Centre has already notified 66 CSSs for implementation under the SNA (Single Nodal Agency) SPARSH model, expenditure secretary Vumlunmang Vualnam said on Friday.
This is the second stage of “just-in-time” release of central funds, a mechanism aimed at preventing the idling of funds.
“From November 1, 2025, all the CSS schemes will be implemented through the SNA Sparsh,” Vualnam said, seeking cooperation from state finance secretaries at the Comptroller and Auditor General (CAG) of India conference here.
Why the government is changing the system
The Centre used to transfer CSS funds to state treasuries, which in turn released these, along with their CSS share (typically 40%), to bank accounts of state SNAs.
Despite just-in-time release instructions, some states delay the transfer of central funds as well as their shares to SNAs, halting implementation of the schemes and/or leading to misuse of central funds for non-scheme purposes by states to finance their fiscal deficits.
Given that funds float in CSS at the bank/state treasuries level were in the range of Rs 1-1.5 lakh crore at any point in time, the SNA Sparsh implementation would cut that float and save nearly Rs 6,000 crore in interest costs to the Centre, sources said.
It will also benefit states. The penal interest for such delays on treasuries and interest from SNA accounts fetched the Centre around Rs 4,000 crore in FY23 and over Rs 5,000 crore in FY25, enough to run a few new schemes, sources said.
How the new RBI mechanism will work
Under the new mechanism of routing funds via the RBI, these issues would also be addressed, the sources added.
The state SNAs will now maintain an account with the RBI for each scheme. In the beginning itself, instead of releasing any money to the SNA, the Centre will issue an authorisation amount as per the sharing pattern of the scheme to the RBI, and the state concerned will also do the same. When actual payment arises, the state will move the payment file to the Centre, which will pass it on to the RBI. The RBI, which already has the authorisation, would release the amount to the SNA from the Consolidated Fund of India first and then from the State Consolidated Fund.
“At a time when we are borrowing (the central government and state governments), I think it behoves us that a float is not allowed to be maintained somewhere else at our expense,” Vualnam said.
He urged all the state finance secretaries and all the relevant stakeholders to continuously move towards a very progressive financial architecture and the Public Financial Management System (PFMS).