THIRUVANANTHAPURAM: The Finance Division’s directive to native self-governments (LSG) to deposit their very own funds in treasuries has sparked off a debate. Critics allege that the round issued on September 18 is a tactic of the federal government to make sure liquidity assist within the time of a disaster. Controversy apart, the transfer might profit LSGs because the treasuries supply increased rates of interest than banks.
In accordance with the Finance Division, native self-governments stand to realize because the rate of interest supplied by treasuries is 1 to 2% increased than financial institution charges, throughout totally different tenures. The round goals to keep away from public funds idling in banks. The apprehensions raised by critics are unfounded since LSGs are actually excluded from methods and means restrictions, it has clarified.
The finance division’s round asks LSGs to park their funds in new Particular Treasury Financial savings Financial institution (STSB) accounts. The federal government has additionally acknowledged that additional directions on the matter will likely be issued by the Finance Division solely.
This beneficial properties significance since LSGs parked their funds in banks primarily based on an order by the Native Self-Authorities Division in Might 2011. The finance division has requested LSGs to adjust to the directive from April 1, 2022. The personal fund of LSGs includes collections from property tax, skilled tax and lease income.