THIRUVANANTHAPURAM: The Accountant General’s (AG) Office is examining the legality of the savings bank under the State Treasuries Department, it is reliably learnt. The AG has reportedly asked the Treasuries Department to state whether it had the permission of the Reserve Bank of India to conduct savings bank operations and to accept deposits from the public.
The AG’s Office has also written to the RBI asking whether the Treasury Savings Bank (TSB) falls under the regulatory framework. When contacted, Finance Minister Thomas Isaac said the matter has not come to his notice. “I will look into it and respond,” he said. The new development, which comes after the CAG’s reported criticism against the KIIFB and the recent vigilance raid on KSFE, is likely to put the finance department in a spot.
The queries of the AG’s Office have taken the Treasuries Department by surprise as the former had never raised this existential question during its previous annual audits. In fact, the TSB neither has the RBI’s permission nor does it fall under the regulatory framework. It is governed by the state government as per the Kerala Treasury Code. The Director of Treasuries is its secretary. Every year, the AG conducts a review of the treasuries and submits the review report to the government.
The “Report on the annual review of working of Treasuries in Kerala 2018-19” was the latest one in the series. The report but did not make any observation on the legality of the savings bank. Some of the findings related to savings bank were the cases of non-transfer of balance amount in unoperated savings bank accounts to revenue deposit and some cases of non-deduction of income tax from SB accounts and fixed deposits.
‘Query over TSB’s legality suspicious’
Chairman of the Fifth Finance Commission B A Prakash said the query over the legality of Treasury Savings Bank was unusual. “The TSB is nothing new and is as old as the state. The question of regulatory compliance at this point of time is suspicious and could be viewed only as an attempt against the principles of cooperative federalism.” he said. He said the deposits in state treasuries are helping the cash-strapped state government in liquidity management.
“There is no illegality involved or manipulations to point out. Then why this unnecessary move when the state is facing a fiscal crisis?” he asked. Prakash said the move resembled the objection raised by the CAG against KIIFB’s masala bonds, which were floated with RBI’s permission. Kerala is the only state in the country that runs a savings bank under its Treasuries Department.
The clientele of the savings bank include various government departments, public sector units, over 10 lakh government employees and pensioners and commoners. The TSB has a huge deposit base, thanks to its fixed deposit scheme that offers higher interest rate than the commercial banks. The present rate is 8 per cent for one-year deposits and 8.5 per cent for those above one year. It does not conduct lending operations.
Only in Kerala
Kerala is the only state in the country that runs a savings bank under its Treasuries Department. The clientele of the SB include government departments, PSUs, over 10 lakh government staff and
pensioners and commoners.