How Indian State Treasuries Move Rs 42 Lakh Crore: IFMS, PFMS, SNA

Somewhere in a district treasury office in Karnataka, a drawing and disbursing officer submits one of roughly 36.75 lakh bills the state processed in 2024-25. That bill, and the 36 lakh others like it, moved Rs 4.43 lakh crore out of a single state's accounts in a year. Multiply that machinery across 28 states and you get the least glamorous, most consequential payment system in India.

Most writing on Indian government payments starts with UPI or direct benefit transfer. Those are the parts citizens see. Underneath them sits the state treasury, the system that decides when money is released, which account it sits in while waiting, and whether the accounts reconcile at the end of the year. This explainer follows the money through that system using the most recent CAG, RBI and state data, and argues that the next round of reform is about float and reconciliation, not speed.

The scale: Rs 42.4 lakh crore and rising

The Comptroller and Auditor General's first decade-long compendium of state finances, released in September 2025, put combined state spending at Rs 42.4 lakh crore in 2022-23, up from Rs 15.9 lakh crore in 2013-14, as The Tribune reported. Uttar Pradesh spent about Rs 4.8 lakh crore and Maharashtra about Rs 4.7 lakh crore. Revenue spending, meaning salaries, pensions, interest, subsidies and grants rather than building things, made up 84.73% of the total, or Rs 35.96 lakh crore.

Within that, committed expenditure on salaries, pensions and interest reached about Rs 15.64 lakh crore, 2.49 times its 2013-14 level, according to Business Standard's reading of the CAG data. Subsidies were Rs 3.10 lakh crore and grants-in-aid Rs 11.26 lakh crore. Capital spending was just 15.27% of the total in 2022-23, against a decade peak of 19.68% in 2016-17.

The RBI's State Finances study published in January 2026 uses a narrower definition and so gets smaller ratios. For all states and union territories, it shows committed expenditure at 31.6% of revenue spending in 2023-24, 29.6% in the 2024-25 revised estimates and 30.6% in the 2025-26 budgets. Pensions alone took 11.8% of revenue spending in 2025-26 budgets and interest 12.2% of revenue receipts. States covered 57.3% of their revenue spending from their own revenue in the 2025-26 budgets. The rest arrives as devolution and grants from the Centre, which is exactly where the treasury plumbing gets complicated.

Three layers of plumbing

It helps to think of state money moving through three layers.

The state IFMS. Each state runs an integrated financial management system that controls budget releases, accepts bills from drawing and disbursing officers (DDOs), passes them, and pushes payments. Karnataka's version is Khajane-II, Tamil Nadu's is IFHRMS, and most other states have their own. Bills are increasingly electronic vouchers with digital signatures. The IFMS also usually hosts the receipt side: citizens and businesses paying taxes, fees and deposits through netbanking, cards, UPI or NEFT, generating an electronic challan.

The Centre's PFMS. The Public Financial Management System tracks central money as it flows to states and implementing agencies. For centrally sponsored schemes it now sits alongside the single nodal agency (SNA) framework, under which each scheme in each state has one designated account from which implementing agencies draw, with balances visible to the Centre.

The banker. The RBI acts as banker to state governments, and its core banking system, e-Kuber, holds state balances, handles the government's cash position and runs the auction calendar through which states borrow. When a treasury runs short, the gap is met through ways and means advances or market borrowing, both of which carry a cost.

Each layer was digitised separately. The friction appears at the seams between them.

What one state's ledger looks like

Karnataka published unusually detailed numbers in a presentation to the CAG's conference of state finance secretaries in September 2025. They show both the payment and receipt sides of Khajane-II over four years.

The system also connects to HRMS for about 5.03 lakh government employees and supports DBT, account-based transfers and e-RUPI vouchers as payment modes. From 1 June 2025 the state stopped sending printed copies of around 7.5 lakh salary-bill vouchers a year to the Accountant General, relying on the electronic record instead. That sounds administrative. It is actually the point at which the digital record becomes the legal record.

Worked example: reading the Karnataka numbers

A few divisions turn that table into something more intuitive.

• Average bill size in 2024-25: Rs 4,42,613.89 crore across 36,75,112 bills is about Rs 12.04 lakh per bill. Most bills are far smaller; a few very large transfers to local bodies and corporations pull the average up.
• Workload per DDO: 36,75,112 bills across 31,556 DDOs is about 116 bills per officer per year, roughly one every two working days, each handling about Rs 14 crore annually.
• Payment growth: payments rose about 44.5% between 2021-22 and 2024-25, while the number of bills rose only about 15%. Treasury throughput is growing in value, not in transaction count.
• Receipts: Rs 1,14,546 crore across 1,90,71,021 challans in 2024-25 is an average of about Rs 60,000 per challan. Challan volume grew about 78% over the four years, while value grew about 41%, consistent with more small payments moving online.

The receipt side is where citizens touch the treasury most directly, through property registrations, fees, and departmental deposits. The rising count of smaller challans suggests the digital front door is being used by individuals, not only by large corporate filers.

The next frontier in treasury reform is not paying faster. It is knowing, on any given morning, where every rupee is sitting and why.

The float problem: SNA balances and unreconciled money

The single nodal agency system was meant to end the old practice of central scheme money being parked across thousands of implementing-agency bank accounts. It has helped, but audit reports show the reconciliation is still messy. The CAG's 2023-24 State Finances audit of Punjab found about Rs 3,372.86 crore lying unspent in SNA accounts at 31 March 2024, according to PFMS data. PFMS recorded Rs 6,487.22 crore transferred to SNAs that year, while the state's own figures put it at Rs 6,677.24 crore, a mismatch of roughly Rs 190 crore between two official ledgers.

The same audit found Rs 406.98 crore of cess and levies collected by DDOs but not deposited into the government account, 2,037 abstract contingent bills worth Rs 2,804.85 crore still awaiting detailed vouchers, and committed expenditure at 65% of the state's revenue spending. None of these are payment-speed problems. They are visibility problems: money has moved, but the ledger cannot fully say where it went or whether it was used.

Why does this matter to anyone outside a finance department? Because unspent balances in scheme accounts are money that the state could have used elsewhere, or that the Centre could have released to a state that needed it. Each crore idling in a nodal account while another treasury borrows through ways and means advances is a real interest cost.

Payroll, the biggest single draw

Salaries were the largest component of committed spending in 19 states in 2022-23, according to the CAG data. That is why so many states are consolidating HR and payroll into their treasury systems. Tamil Nadu sanctioned Rs 288.91 crore for IFHRMS to link about 29,000 DDOs and digitise around 9 lakh service registers, according to a 2018 state government release. Telangana set a 15 October 2026 deadline to finish digitising records for about 3.48 lakh employees across 38,710 offices and directed that DBT sanctions use Aadhaar authentication, according to The Hans India.

Integrating HR with the treasury closes an old gap: the employee master and the payment record used to be separate systems, which is where ghost employees and duplicate payments hide. Our companion piece on government payroll and wage payments covers that side in more detail, including the shift to 60:40 funding for rural wages that lands directly on state treasuries from July 2026.

Where programmable money might fit

There is an obvious argument that tagged or programmable money could solve the float problem: if a scheme rupee could only be spent for its intended purpose, and only released when a milestone is met, the SNA balance would effectively become a set of conditional payments rather than a pooled account. Karnataka already lists e-RUPI as a supported payment mode, and our explainers on e-RUPI vouchers and purpose-bound money look at how that works in practice.

We are cautious about over-reading this. The Punjab audit's problems were missing vouchers and undeposited collections, not a lack of programmability. A treasury that cannot reconcile two ledgers today will not fix that by adding a third, more complex one. The sequence that makes sense is integration first (one employee master, one scheme account view, one receipt ledger), and only then conditional money for specific flows such as contractor milestone payments. India's broader digital public infrastructure gives states the identity and payment rails; the ledger discipline has to come from inside each finance department. For background on how money actually moves between banks and the RBI, see what are payment rails.

What to watch next

• 15 October 2026: Telangana's e-HRMS completion deadline. Whether it holds is a useful test of how quickly a large state can consolidate its employee master.
• October 2026 to March 2027: the first two full quarters in which states fund 40% of rural employment wages under the VB-G RAM G Act. Watch ways and means advance usage at the RBI and any reports of states delaying their share.
• 1 February 2027: the Union Budget for 2027-28, which will set transfers to states and show whether the Centre tightens SNA release conditions further.
• Early 2027: the RBI's next State Finances study, which will carry 2024-25 accounts and 2026-27 budgets, and the first audited numbers on whether committed spending ratios moved after the new wage-sharing rule.

State finance data are revised as accounts are audited. Ratios from the RBI and the CAG use different definitions of committed expenditure and are not directly comparable.

About this researchMuffinPay InsightsIndependent analysis of stablecoins, CBDCs, cross-border payments and digital public infrastructure. Every figure is linked to its source. Read our editorial standards →