In Budget, the Government allocates funds to each ministry and for each government scheme. But where is all this money kept? and how transactions are done? In this article, we will understand how the government money is handled and government keeps its money in which bank.
The Ministry of Finance plays a central role in this process. Almost every rupee earned by the Central government passes through this ministry before it is distributed to states, ministries and welfare schemes.
The Government earns money mainly from tax and non-tax sources. Tax revenue includes direct taxes like income tax and corporate tax, and indirect taxes like GST and customs duty. These taxes are collected through agencies such as the Central Board of Direct Taxes (CBDT) and the Central Board of Indirect Taxes and Customs (CBIC).
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Non-tax revenue comes from dividends paid by public sector companies, licence fees, spectrum charges and interest received by the government.
Government Money is kept in which Bank?
The Reserve Bank of India (RBI) is the main banker of the Government. Important government accounts such as the Consolidated Fund, Contingency Fund and Public Account are maintained with the RBI.
Under the RBI Act, 1934, the RBI manages all receipts, payments, borrowings and settlements of the Central government. While the Finance Ministry decides policy, the RBI handles day-to-day account operations.
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All government revenues are deposited into the Consolidated Fund of India. This is the main account of the Central government. It is monitored through a central accounting system managed by the RBI’s office in Nagpur.
How is money withdrawn from Consolidated Fund?
According to the Constitution, money cannot be withdrawn from the Consolidated Fund without Parliament’s approval. Spending is allowed only after Parliament passes the Appropriation Bill.
Once approved, the Ministry of Finance releases funds, and these are tracked through the Public Financial Management System (PFMS).
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If any money remains unspent, it automatically lapses on March 31. It returns to the Consolidated Fund. If the government wants to spend it in the next year, fresh approval from Parliament is required.
