IMPLICATION OF TREASURY SINGLE ACCOUNT ON BANKING SECTOR AND WHOLE ECONOMY: BY NISHI KOTHARI

Treasury Single Account – An essential tool for government and cash management? This article proposes to discuss the delineation of government banking arrangements – how a treasury single account addresses them, and proposes to circumvent the contextualities pervading the implementation and sequencing issues cohabitated while establishing and using a Treasury Single Account. (Hereinafter referred to as the ‘TSA’)

 

What is a TSA?

Consolidated view of government cash resources is given by a TSA system, the same being a unified structure of government bank accounts. Unity of cash and treasury principles: TSA is a system of bank accounts, linked, through which receipts and payments are transacted by the government. The treasury is able to control and manage cash reserves circumventing the process, by distinguishing individual cash sources via an accounting system, and not by the residence of transactional cash in specific bank accounts, irrespective of the attached control and reporting conditionalties. Such an accounting system helps proper appropriation of cash on a transactional level.

 

Government cash resources are hence best managed via arrangements circumventing strategic financial organisation. Such arrangements are integral factors to not only enunciate the efficient control and management of government resources, but also to ensure the effective appropriation of tax and non-tax revenues. Government bank accounts, when unified and structurally organised, shall facilitate optimal management of cash reserves – to reduce borrowing costs and/or to maximize returns on surplus cash, done via the establishment of a TSA system. [1]

 

Developing and low income countries, e.g. – India, have government banking arrangements, hindering effective cash control and management due to their fragmented nature. Idle cash is commonly found in multiple bank accounts of commercial banks. TSA plays an important role to effectively aggregate the control of cash, being an integral element of monetary and budget management. [2]

 

Major Conceptualities of a TSA.

Idle cash found in bank accounts is not effectively appropriated to earn economic remuneration. The government, due to postulated ignorance, encompasses unnecessary stipulations for raising funds to facilitate cash inflow during shortage conditions. Idle government cash balances rested in transactional accounts are not solely for bank usage, but also for credit extension. There are costs vested on central banks due to these extra liquidity impositions transferred via open market operations. Hence a reform is needed to implicate better coordination of fiscal and monetary policies, as well as better syndication of banking and fiscal data, the culmination of which shall improve fiscal information coordinates, done via first priority establishment of the TSA in such a public financial management reform agenda. The same reduces debt services costs immensely. Other conceptualities of such a system surround budget execution in a reliable and efficient manner – minimisation of cash outflow; control over government remittances by collecting banks; banking and accounting data syndication; control and management of funds appropriated by government agencies; and effective monetary policy implementation. [3]

 

Features of TSA.

Certain postulations circumferencing such a system are denoted by its arrangements. The TSA is unified system of arrangement – increasing the effectiveness of stipulated government cash resources. Mainly it tries to enunciate the sole responsibility of the government to operate bank accounts without undue interference of the treasury. It also comprehensively encompasses government cash sources, circumferencing budget extrapolations. [4]

 

Architecture of TSA.

The design of TSA is non repetitive. There being no single model – every country has its own postulations to implement this system. Stages of development, quality of institutions, financial system management, technological infrastructures and banking system maturitisations, affect the implementation of such a system.

 

Well-developed Public financial management systems in countries, accommodate adequate technological and financial systems, imbibed in the banking sector to create TSA in the central bank. The treasury then on uses integrative encompassments: Treasury General Ledger to record transactions of different entities. Zero – balance should be the basis for spending agencies to establish transaction accounts in commercial banks.

Technology used in interbank settlements, electronic and/or manual externalities used by central banks for clearing of transactions with commercial banks, influence the design of the TSA. RTGS – Real Time Gross Settlements System, may also be used by banking systems. Streamline of revenue transference, the procedures encompassing the same, shall make TSA more efficient, and the operations of the same are integratively compliant. An Electronic Fund Transfer System shall enhance the transactional procedures of various suppliers and beneficiaries bank accounts. [5]

Implicatory Mechanisms.

The TSA structure is independent of making budget authorisation decisions. It showcases non-interference in matters of budget delegation for ministries and spending units. There is considerable autonomy for budget implementation in developed countries having decentralised budget and accounting systems. Ensuring all end of the day balances to be swept electronically in the TSA enhances accountability and transparency of government banking arrangements.

Cash management and distribution responsibility issues to be separated for accounting control and administration of transactions to avoid confusion. Systems having both centralised and decentralised processing of transaction can be used for TSA operation. The aforementioned also depends on the technological arrangement enunciated in a countries banking sector, inclusive of the communications network. The Governments banking arrangement to play a major role. [6]

Conclusion.

The establishment of the TSA extrapolates an efficient system of effective public finance management. It is an essential medium to reduce borrowings undertaken by governments and minimise such costs. All countries should enunciate the need to establish such a system as it not only integrates better compliance and financial transparency, but also facilitates development oncologies, unique to each cou

---

[1] Fainboim Yaker, I. and Pattanayak, S., Treasury Single Account: Concept, Design, and Implementation Issues, p.1,  IMF WORKING PAPERS, 10(143), (2010).

[2] Meyer, W. Treasury single account and public fund management. p. 77-82, INTERNATIONAL JOURNAL OF SCIENTIFIC AND ENGINEERING RESEARCH, 9(12), (2018).

[3] GFSM, IMF 2001.

[4] MANUAL ON FISCAL TRANSPARENCY, p. 55, IMF, 2007.

[5] Charles. L., Setting Up a Treasury in Economies in Transition, IMF WORKING PAPER 95/16 (Washington: International Monetary Fund), (1980).

[6] Nwoargu, I. An overview of the treasury single account. (2015). http://placing.org/legist/an-overview-of-the- treasury-single-account-tsa/ (Aug 5, 2020, 5pm).