How PFMS is ensuring transformation via digital inclusion


From UPSC perspective, the following things are important :

Prelims level: PFMS

Mains level: Paper 2- Role of PFMS in improving governance

The article highlights the role played by the Public Financial Management System (PFMS) in promoting the good governance.

About PFMS

  • With the objective of bringing in transformational accountability and transparency and to further promote good governance, the Indian government envisioned Public Financial Management System (PFMS).
  • PFMS has evolved as an end to end solution for Processing, Monitoring, and reconciling financial flows of Central Govt.
  • Today, PFMS has empowered governance to become more responsive, accountable, and transparent.

Mandate of PFMS

  • Through Cabinet decision, PFMS has been mandated the following:
  • It acts as a financial management platform for all plan schemes and allows for efficient and effective tracking of fund flow to the lowest level of implementation for the planning scheme of the Government.
  • It is mandated to provide information on fund utilization leading to better monitoring, review, and decision support system to enhance public accountability in the implementation of plan schemes.
  • To result in effectiveness and economy in Public Finance Management through better cash management for Government transparency in public expenditure and real-time information on resource availability and utilization across schemes.

Achievements of PFMS

  • PFMS can be credited to the transformation of Direct beneficiary transfers space in financial governance in India.
  • An estimated 102 crore DBT transactions were done through PFMS in FY 19-20 amounting to about 2.67 lakh crore.
  • Through efficient use of technology, PFMS is estimated to have saved about 1 lakh crore in direct beneficiary transfers.

4 Factors that could determine the successful evolution of PFMS in future

  • Agility in terms of Onboarding/Integrating all Govt. accounts: Only after ensuring significant coverage, the true execution of the concept will take place.
  • Effective data management capabilities: PFMS will have to add significant data management capabilities in order to ensure better monitoring/review to deliver on the idea of a decision support system for effective cash management or management of idle float in the system.
  • Constantly upgrading: Adaption to rapid changes in technology is another key area that would call for a considerable amount of focus both in terms of gradation and monitoring.
  • Collaboration with the banking system: Lastly, one of the most critical factors for the successful execution of PFMS is its integration with the banking systems.
  • The Banks and PFMS will have to actively partner to ensure faster coverage/integration of all the Govt. entities.

Consider the question “Governance in India has long been marred with structural challenges like transparency, lack of accountability and sustainable and inclusive growth. In light of this, discuss the role played by the Public Financial Management System in tackling these challenges.” 


The PFMS has revolutionized the ways public finances are managed in the country. With constant improvement and increasing coverage, the scope of PFMS is ever-increasing. Going ahead, PFMS will not only be seen as a tool for managing planned expenditure but will also add new meanings to Direct Beneficiary transfers, data-driven cash management, and e-Governance in India.

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