Rule 85 of The General Financial Rules 2017 Banking Arrangements
Original Rule Text
Visual Summary
RBI manages government cash balances and banking facilities.
RBI nominates banks for specific Ministry banking needs.
Identified branches handle all government payments and receipts.
Executive Summary
Rule 85 of The General Financial Rules, 2017, outlines the critical banking arrangements for the Government of India. It designates the Reserve Bank of India (RBI) as the primary banker, responsible for maintaining the Government’s cash balance and providing comprehensive banking facilities. To extend these services, the RBI, in consultation with the Controller General of Accounts, nominates specific banks to act as ‘Accredited Banks’ for various Ministries and Departments. These accredited banks, through their identified branches, are mandated to process all government payments and collect departmental and tax revenues, ensuring a streamlined and centralized financial management system.
In-Depth Analysis of the Rule
Rule 85 establishes the foundational framework for the Government of India’s banking operations, ensuring clarity and accountability in financial transactions. This rule is pivotal for maintaining fiscal discipline and efficient fund management across all government entities.
Breakdown of the Rule:
- RBI as Government’s Banker: The Reserve Bank of India is explicitly designated as the Government’s banker, tasked with managing its cash balances and providing banking services. This centralizes the core banking function for the Union.
- Provision of Banking Facilities: RBI extends banking facilities directly through its own offices or indirectly through agent banks to various Ministries, subordinate, and attached offices. This ensures wide accessibility of banking services.
- Nomination of Accredited Banks: In consultation with the Controller General of Accounts, RBI nominates specific banks to serve as ‘Accredited Banks’ for individual Ministries or Departments. This tailored approach ensures specialized service delivery.
- Assignment Accounts: Pay & Accounts offices and Cheque Drawing and Disbursing Officers are required to maintain assignment accounts with the identified branches of these Accredited Banks. This formalizes the operational link.
- Centralized Payment and Collection: All government payments and the collection of departmental and tax revenues are to be channeled through these identified branches of the Accredited Banks. This streamlines financial flows and enhances oversight.
- Reference to Detailed Procedure: The rule notes that detailed procedures for remittance of government receipts and reimbursement of payments are outlined in Memoranda of Instructions issued by the Reserve Bank of India, indicating further operational guidance.
Practical Example:
Imagine the Ministry of Defence needs to make a large payment to a supplier. According to Rule 85, their Pay & Accounts office would have an assignment account with an identified branch of the Ministry’s Accredited Bank, nominated by the RBI. The payment would be processed through this specific branch. Similarly, if the Ministry of Finance collects tax revenues, these would be deposited into the Government account via the RBI’s own offices or through the nominated branches of its agent banks, as per the established banking arrangements.
Related Provisions
Rule 85 operates within a broader framework of financial management. Understanding its connections to other rules provides a holistic view:
- Rule 7 of The General Financial Rules 2017 Government Moneys Receipts: This rule mandates that all government moneys be brought into the Government Account without delay, a process facilitated by the banking arrangements outlined in Rule 85.
- Rule 71 of The General Financial Rules 2017 Preparation and Presentation of Accounts: The accurate maintenance of government accounts, as required by Rule 71, relies heavily on the efficient banking operations managed by RBI and its accredited banks under Rule 85.
- Rule 86 of The General Financial Rules 2017 Public Financial Management System: The PFMS, an integrated financial management system, works in conjunction with the banking arrangements of Rule 85 to ensure seamless sanctioning, payment processing, and receipt management.
Learning Aids
Mnemonics:
- RBI Banks All Payments & Collections: Reserve Bank of India is the Banker, handles All Payments and Collections.
Process Flowchart:
Multiple Choice Questions
1. According to Rule 85 of The General Financial Rules, 2017, who is designated as the banker to the Government?
- A) State Bank of India
- B) Ministry of Finance
- C) Reserve Bank of India
- D) Controller General of Accounts
Show Answer
Correct Answer: C) Reserve Bank of India
2. As per Rule 85 of The General Financial Rules, 2017, with whom does the RBI consult to nominate an Accredited Bank for a Ministry?
- A) Ministry of Finance
- B) State Government
- C) Controller General of Accounts
- D) Public Sector Banks
Show Answer
Correct Answer: C) Controller General of Accounts
3. Under Rule 85 of The General Financial Rules, 2017, what type of accounts do Pay & Accounts offices and Cheque Drawing and Disbursing Officers maintain with identified branches of Accredited Banks?
- A) Savings accounts
- B) Current accounts
- C) Assignment accounts
- D) Fixed deposit accounts
Show Answer
Correct Answer: C) Assignment accounts
4. Rule 85 of The General Financial Rules, 2017 states that all government payments shall be made through which entities?
- A) Directly by the Ministry’s treasury
- B) Identified bank branches of the Accredited Bank
- C) Any commercial bank branch
- D) Post offices
Show Answer
Correct Answer: B) Identified bank branches of the Accredited Bank
5. What type of revenues are collected by the RBI through its own offices or nominated agent banks, as per Rule 85 of The General Financial Rules, 2017?
- A) Only departmental receipts
- B) Only non-tax revenues
- C) Tax revenues
- D) All types of private donations
Show Answer
Correct Answer: C) Tax revenues
Frequently Asked Questions
Q: What is the primary role of the Reserve Bank of India under Rule 85 of The General Financial Rules, 2017?
A: The RBI’s primary role is to act as the banker to the Government, maintaining its cash balance and providing comprehensive banking facilities to all Ministries and offices.
Q: How are banking facilities extended to Ministries and subordinate offices as per Rule 85?
A: Banking facilities are extended either directly through RBI’s own offices or through agent banks. The RBI, in consultation with the Controller General of Accounts, nominates specific banks as ‘Accredited Banks’ for each Ministry.
Q: What types of financial transactions are handled by the identified branches of Accredited Banks under Rule 85?
A: These branches handle all government payments and collect departmental and other receipts, including tax revenues, ensuring a centralized system for financial transactions.
Key Takeaways
- Rule 85 designates the Reserve Bank of India (RBI) as the central banker for the Government of India.
- RBI manages the Government’s cash balance and provides banking facilities directly or through agent banks.
- Accredited Banks are nominated by RBI (in consultation with CGA) for specific Ministries.
- All government payments and receipts, including tax revenues, are processed through identified branches of these Accredited Banks.
Conclusion
Rule 85 of The General Financial Rules, 2017, is fundamental to the operational efficiency and financial integrity of the Government of India. By clearly defining the roles of the RBI and its accredited agents, it establishes a robust and centralized banking framework that underpins all government financial transactions, from managing cash balances to processing payments and collecting revenues. Adherence to these banking arrangements is crucial for transparent and accountable public financial management.