THIRUVANANTHAPURAM: Dr T M Thomas Isaac has always seen the state government Treasury as a sort of piggy-bank, something to fall back on in times of need. But UDF’s finance minister K M Mani was suspicious; he saw it as “highly volatile” and encouraged government employees and pensioners to ditch the Treasury and depend on nationalized and private banks to park their earnings.
Now, after the Treasury has lost nearly 80 percent of its accounts to banks in the last five years, Isaac wants to revive the Treasury and make it a crucial component of his economic strategy. The existing practice is for salaries and pensions to be transferred to banks right at the start of the month. Isaac wants the money to remain in the Treasury for some more time.
The finance minister’s plan is to make Treasury deposits attractive by increasing the interest on deposits by half or one percentage point vis a vis normal banks, and then offer government employees and pensioners a choice. “They can either transfer the entire amount to a bank or they can ask the Treasury to transfer the money in slow instalments to the bank,” Isaac said.
Given the higher interest rates, Isaac is optimistic that people will opt for the latter. His objective is to have at least Rs 1,500 crore as cash balance in the Treasury at any point of time. Isaac also looks upon Treasury funds as a cheaper borrowing option. Nonetheless, Isaac’s latest ambition seems moderate. During his last tenure, he wanted treasury ATMs across the state.
The proposal was nixed by RBI. However, Isaac’s move to replenish the Treasury looks sensible as Mani himself had realised. Though Mani had publicly mocked Isaac and dumped his Treasury strategy, he was forced to bring it back towards the end of his tenure when finances slipped badly. Mani had come out with a circular in March last year ordering PSUs, autonomous bodies like universities, statutory boards and cooperative institutions to park their funds in the Treasury.
