Unspent Central funds to states to be settled in real time from Apr 1

Settlement of the unspent amount from the funds that the Centre sends to states through the single nodal agency (SNA) will happen within a day from April 1, eliminating the need to park it outside the government account for more than 24 hours.

The SNA account is used for transferring funds to states for centrally sponsored programmes and there are timelines for the expenditure. The settlement of unspent money currently happens on a quarterly or monthly basis. The Department of Expenditure and the Reserve Bank of India are working together to upgrade the SNA system to settle the unused amount by the states in real time, which will also eliminate disputes over the payment of interest earned on such unspent funds lying in state SNAs, officials in the know said.

The government and the banking regulator have already launched a pilot project in five states and will implement it across India from April 1, they said.


"This is taking the SNA functionality to the next level, making the usage of funds more efficient and in a more transparent manner," a senior official told ET.

Currently, states are earning interest accrued on the unutilised funds lying with the state-level single nodal agencies, the official said. Several states have not paid interest on the Centre's share on such funds, he added.

With most of the states not complying with the communication sent to them on sharing of the interest, the Centre has said unless the states pay the interest by March 31, it would not release the 50-year interest free loans offered to them. "With the new SNA functionality, that dispute will not arise and states have to exhaust the amount before getting the fresh sanction," the official said.

This will also eliminate any possibility of diverting the fund to another account.

Last year, finance secretary TV Somanathan said how data analytics helped the Centre detect that some states were parking money from SNA accounts to some other bank accounts, which was prohibited. The Centre had budgeted to provide ₹1.3 lakh crore to states as interest-free, long-term capex loans for the ongoing fiscal year. However, the target was cut to Rs 1.05 lakh crore, with some states failing to meet the eligibility criteria to receive the loan.

For the fiscal year 2025 also, the Centre has budgeted an outlay of ₹1.3 lakh crore as interest-free, long-term capex loans to states.