How does Unique Code of Payee work?

 How does Unique Code of Payee work?

-Dr. Lalit Kumar

In Government, it is expected that the payments are made directly in the bank account of the beneficiaries/payees. This is implemented in Government to contain corruption. However, there are transactions where the instructions for making direct payment to the account of beneficiaries/payees are not being compliant. For example, a few departments are maintaining bank accounts with the title of ‘Designation’ of Head of Department or Head of Office and use these bank accounts to transfer money to the beneficiaries/payees. Firstly, the funds/money are drawn from treasuries and deposited in such bank accounts and thereafter, it is transferred to the accounts of beneficiaries/payees with the help of Demand Draft or Cheque or EFT.

Why it is wrong to maintain Bank Account by Government Offices?

Let us understand it with the help of an example. Suppose it is required to make payment to Mr. A by the Government from time to time. The right way is to transfer the amount directly from the treasury to the account of Mr. A whenever there is a need to make the payment. But the Head of Office started a bank account and draws the money from the treasury and keeps it in the bank account. Whenever it is required to pay an amount to Mr. A, then it is paid directly with the help of a cheque/demand draft/EFT from the bank account. Why it is wrong? The Financial Rules of Government restrict for parking of funds in a bank account even for a small-time duration i.e. the duration from the day the amount is drawn from the treasury to the day it is paid to the beneficiary/payee. The accurate method is to form a Unique Code of Payee (UCP) of the beneficiary/payee which will be used to identify the correct account to transfer the amount directly from treasury after processing of payment from DDO to Treasury Officer and from Treasury Officer to Treasury Bank.

Exceptions, where it is required to maintain Bank Account by Head of Office

The Government through Finance Department may consider the exceptional circumstances where it is required to open and operate a bank account in the name/designation of an Officer for certain specific transactions. The detailed proposal may be sent by the office where it is required to open and operate a bank account with details of circumstances. In Haryana State, such instructions were issued on 2^nd December 2011 for the closing of bank accounts that are opened without seeking permission of the Finance Department Haryana.

Electronic Payment System (EPS)

For implementing Electronic Payment System (EPS), it is required that all the beneficiaries/payees have their bank accounts and the details are communicated to the treasuries so that a Unique Code of Payee (UCP) is issued to the payee. It is most important to ensure that accurate PAN number and banking details are entered in each UCP, to safeguard the system from frauds on part of concealment of income from the income tax department, a UCP without PAN number may be allotted only in cases where the annual income of the payee is not made him liable to pay any income tax and provisions of TDS are also not attracted in payments to the payee. Such declaration should be done by the Drawing and Disbursing Officer (DDO) before allocating the UCP without mentioning the PAN number.

Unique Code of Payee (UCP) for containing Corruption

In January 2012, the Haryana Government ensured proper implementation of the Electronic Payment System (EPS) and directions issued to the treasury officers to pass the bills to the extent possible with using EPS instead of the issue of cheques. However, where the EPS is not possible due to any fault in the system or other reason, the cheques may be issued.

For containing corruption, the payees are asked to open a bank account and provide the details to the Drawing and Disbursing Officer (DDO). The DDO provides the banking details of the payees for allotment of UCP in the system. It is the responsibility of the DDO to ensure that correct details of PAN, PRAN, and GPF numbers are provided by the payee. In October 2011, the Haryana Government beautifully implemented the UCP in most of its treasuries and sub treasuries.

Payment of NPS Contribution through EPS

In July 2012, the Haryana Government decided to transfer the NPS contribution through EPS instead of the cheque to the trustee bank of NPS. The NPS ‘Subscriber Contribution Form’ is attached with the NPS bill and a token of the bill is given in Form Code 14 in Pension Module. The unique code of the trustee bank is CN0L1O generated in DDO code 0765. After the transfer of the NPS amount, the treasury officer follow-up the status of the file on the site of NSDL.

*Copyright © 2021 Dr. Lalit Kumar. All rights reserved. 

This article is written by Dr. Lalit Kumar Setia; a renowned author and trainer. He completed his Doctorate in Commerce from Kurukshetra University Kurukshetra and MBA in Information Technology from GJU, Hisar. He also wrote two books, 15 research papers, and organized more than 200 Training Courses during his working period since 2006 in Haryana Institute of Public Administration, Gurugram. The article was published on 24th September 2021 and last updated on 24th September 2021. The writer can be contacted on lalitkumarsetia@gmail.com 

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