State Govt Account Settlement: New T+3/T+5 Timelines & Interest
Current & verified — this is the latest version
Source: Reserve Bank of India · RBI/2006-2007/291 · issued 21 Mar 2007 · ~2 min read
Quick answerRBI mandates uniform T+3 (local) and T+5 (outstation) working-day settlement for State Government transactions from April 1, 2007. Delayed remittances attract interest at Bank Rate + 2% (for Rs.1 lakh+) or tiered rates for smaller amounts. Banks must align reporting with Central Government norms.
The rule, in the simplest words
Banks must finish settling local State Government transactions within 3 working days (T+3) using the RBI calendar.
Banks must finish settling outstation State Government transactions within 5 working days (T+5) using the RBI calendar.
If a bank is late, interest starts from the day after the deadline (put-through date), not from when the money was received.
For big transactions of Rs.1 lakh or more, the late fee interest is Bank Rate + 2%.
For smaller transactions below Rs.1 lakh, the late fee interest is just Bank Rate if delayed up to 5 calendar days, but Bank Rate + 2% if delayed longer.
How it plays out — a real example
A forex & trade-finance officer in Indore collects a State Government tax payment on Monday. Since the collecting branch and the focal point branch are in the same city, she must settle it with RBI by Thursday (T+3 working days). If she misses that deadline, the bank will pay interest at Bank Rate + 2% for the delay, starting from Friday.
What changed
RBI partially modifies its February 2003 instructions on State Government account settlement. The new circular aligns State Government transaction timelines with existing Central Government rules: T+3 working days for local transactions and T+5 for outstation transactions, using the RBI calendar. Delayed period interest is now calculated from the day after the prescribed put-through date, not from the transaction date.
What it means for you
Banks handling State Government accounts must tighten internal processes to meet stricter settlement deadlines or face interest penalties. The uniform framework simplifies compliance but increases operational pressure, especially for outstation branches. Interest on delays is now more punitive for larger amounts (Bank Rate + 2%), while smaller transactions have a grace period of 5 calendar days at Bank Rate only.
What you must do
Update internal SOPs for State Government transactions to enforce T+3 (local) and T+5 (outstation) settlement timelines using RBI's working day calendar.
Train branch staff on the new delay interest calculation: actual delay period starts from the day after the put-through date, not the transaction date.
Monitor transactions of Rs.1 lakh and above separately to avoid higher interest at Bank Rate + 2%.
Ensure focal point branches and collecting branches coordinate effectively to meet settlement deadlines.
Communicate revised procedures to all branches accredited for State Government business before April 1, 2007.
Who it affects
All Public Sector Banks (excluding IDBI Bank Ltd.), Branches handling State Government tax and non-tax receipts, Focal point branches for State Government accounts, Treasury and operations teams managing government transaction settlements
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
What is the new timeline for settling State Government transactions with RBI?
Local transactions (same city/agglomeration) must settle within T+3 working days, and outstation transactions within T+5 working days, where T is the day money is available to the bank branch. The RBI calendar determines working days.
How is delayed period interest calculated under the revised rules?
Interest is charged for the actual delay period starting from the day after the prescribed put-through date. For transactions of Rs.1 lakh and above, the rate is Bank Rate + 2%. For smaller amounts, delays up to 5 calendar days attract Bank Rate only; beyond 5 days, the full delay period is charged at Bank Rate + 2%.
When does the revised procedure take effect?
The new rules come into effect from April 1, 2007. Banks must ensure compliance from that date for all State Government transactions.
📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
RBI’s words: “partial modifications were done in the para 5.11 of the "Memorandum of Instructions on Accounting and Reconciliation of State Government Transactions".”
📜 Read the original circular — full text as issued by RBI
RBI/2006-2007/291
DGBA. GAD. No.
H- 14061/ 31.04.008/2006-07
March 21, 2007
The
Chairman & Managing Director/ Managing Director
All Public Sector Banks
(excluding IDBI Bank Ltd.)
Dear Sir,
Maintenance
of State Government Accounts
– Recovery of Interest on delayed remittances
(State
Government Transactions)
Please
refer to our circular DGBA. GAD. No. 1377/ 31.04.008/ 2002-03 dated February 22,
2003 wherein our instructions regarding the implementation of the
recommendations
of the Working Group on "Accounting and Reconciliation of State Government
Transactions" were conveyed to Banks. In partial modifications of the
instructions
contained in para 5.11 (A) and 5.11 (B) of the "Memorandum of Instructions"
forwarded with our circular referred to above, we advise as under:
2. With a view to bringing in uniformity in time-frame for reporting both
Central and State Government Transactions to the Reserve Bank, it has been decided
with the approval of Comptroller and Auditor General of India that the existing
procedure applicable to Central Government transactions, as explained below, may
also be made applicable to State Government transactions.
(a) Local Transactions
- wherever the collecting bank branch and the focal point branch of the bank are
in the same city/agglomeration, the settlement of transaction with RBI shall be
completed within T+3 working days (where T is the day when money is available
to the bank branch). For calculating the working days, the RBI calendar will be
followed.
(b) Outstation Transactions- wherever the collecting
bank branch and the focal point branch of the bank are in different cities/agglomeration,
the settlement of transaction with RBI shall be completed within T+5 working days
(where T is the day when money is available to the bank branch). For calculating
the working days, the RBI calendar will be followed.
(c)
In case of both the local and outstation transactions, the put through date, i.e.
the date of settlement with the RBI shall be kept outside this time limit of T+3
and T+5 working days, respectively.
(d) Delayed period
interest shall be imposed on the banks for the actual delayed period and not from
the date of transaction. In other words, the ‘delay period’ calculation will start
from the day following the prescribed put through date.
(e)
The period of delay in respect of transactions of Rs.1 lakh and above shall attract
delayed period interest at Bank Rate + 2%.
(f) For transactions
below Rs.1 lakh each, the delayed period interest shall be levied at the Bank
Rate for delays up to 5 calendar days and at the Bank Rate + 2 % in case of delays
above 5 calendar days for the full period of delay.
(g)
The above instructions at para 4 (a) to (f) shall also be applicable in respect
of Non-Tax and all other Government receipts.
(The Bank
Rate will be the rate notified by the RBI from time to time as applicable at the
time of transaction).
3. The revised
procedure will come into effect from April 1, 2007. The procedure for claiming/
recovering of delayed period interest will remain unchanged and it will be charged
irrespective of the amount of remittance involved in a particular transaction.
4. You may bring the revised procedure to the notice of
your branches accredited to conduct State Government transactions and advise them
to strictly adhere to the prescribed time schedule for reporting State Government
transactions.
5. All the State Governments
are being advised about the revised procedure.
Yours
faithfully,
(M. T. Varghese)
General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2006-2007/291 · issued 21 Mar 2007. The plain-English explanation above is BankPulse’s own independent summary.
Train branch staff on the new delay interest calculation: actual delay period starts from the day after the put-through date, not the transaction date.
Ensure focal point branches and collecting branches coordinate effectively to meet settlement deadlines.
Communicate revised procedures to all branches accredited for State Government business before April 1, 2007.
⚙️ Operations
Update internal SOPs for State Government transactions to enforce T+3 (local) and T+5 (outstation) settlement timelines using RBI's working day calendar.
📜 Compliance
Monitor transactions of Rs.1 lakh and above separately to avoid higher interest at Bank Rate + 2%.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are an Operations officer at a bank this circular applies to (All Public Sector Banks (excluding IDBI Bank Ltd.), Branches handling State Government tax and non-tax receipts, Focal point branches for State Government accounts, Treasury and operations teams managing government transaction settlements), your first concrete step on “State Govt Account Settlement: New T+3/T+5 Timelines & Interest” is: “Update internal SOPs for State Government transactions to enforce T+3 (local) and T+5 (outstation) settlement timelines using RBI's working day calendar.” (RBI issued this 21 Mar 2007).
Circular: RBI/2006-2007/291 -- State Govt Account Settlement: New T+3/T+5 Timelines & Interest
Issued: 21 Mar 2007
Action required: Update internal SOPs for State Government transactions to enforce T+3 (local) and T+5 (outstation) settlement timelines using RBI's working day calendar.
Action required: Train branch staff on the new delay interest calculation: actual delay period starts from the day after the put-through date, not the transaction date.
Action required: Monitor transactions of Rs.1 lakh and above separately to avoid higher interest at Bank Rate + 2%.
Action required: Ensure focal point branches and collecting branches coordinate effectively to meet settlement deadlines.
Action required: Communicate revised procedures to all branches accredited for State Government business before April 1, 2007.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
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BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=3368&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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