Rule 272 of The General Financial Rules 2017 Interest Payments
Original Rule Text
Visual Summary
Interest on external loans must be paid strictly by the stipulated due date.
Debited under Major Head ‘2049-Interest Payments’ for external loans.
Interest payments on external loans are classified as charged expenditure.
Executive Summary
Rule 272 of The General Financial Rules, 2017, mandates the timely payment of interest on external loans as per stipulated agreements and budget provisions. These payments are specifically accounted for as a debit under the Major Head ‘2049-Interest Payments’ within the Consolidated Fund of India and are classified as charged expenditure. The procedure for transferring these amounts mirrors that used for loan repayments, as outlined in Rule 271.
In-Depth Analysis of the Rule
Rule 272 provides clear directives for managing interest payments on external loans, ensuring financial discipline and transparency in government accounting. It emphasizes adherence to contractual obligations and proper classification of such expenditures.
Breakdown of the Rule:
- Timely Payment: Interest on external loans must be paid precisely on the due date specified in the respective loan or credit agreements.
- Budget Provision: These payments are to be made against the budget provision specifically allocated for this purpose.
- Accounting Classification: All interest payments on external loans are to be recorded as a debit under the Major Head ‘2049-Interest Payments’ in the Consolidated Fund of India.
- Procedural Consistency: The process for transferring these interest amounts is identical to the procedure followed for the repayment of the principal loans, as detailed in Rule 271.
- Expenditure Classification: Interest payments on external loans are categorized as ‘charged expenditure’, meaning they are not subject to a vote by the legislature.
Practical Example:
Imagine the Indian government has an external loan from the World Bank. The loan agreement stipulates that interest payments are due semi-annually on June 30th and December 31st. According to Rule 272, the Ministry of Finance must ensure that these interest payments are processed and disbursed by these exact dates, utilizing the specific budget allocation for ‘Interest Payments on External Loans’. The accounting entry will debit ‘2049-Interest Payments’ in the Consolidated Fund of India, and this expenditure will be recognized as a charged expenditure, not requiring a parliamentary vote.
Related Provisions
Understanding Rule 272 is enhanced by reviewing related provisions:
- Rule 271 of The General Financial Rules 2017 Repayment of Loans: This rule outlines the procedure for the prompt repayment of principal on external loans, which Rule 272 references for its interest payment procedures.
- Rule 264 of The General Financial Rules 2017 Implementation of Projects or Schemes through External Aid Receipt: This rule sets the context for projects and schemes funded by external aid, which are the source of the external loans mentioned in Rule 272.
- Rule 251 of The General Financial Rules 2017 Interest on Loans: This rule details the general principles for charging interest on various types of loans, providing a broader framework for the specific external loan interest payments covered by Rule 272.
Learning Aids
Mnemonics:
- I.P.A.C.T.: Interest Payments Accounted Charged Timely.
Process Flowchart:
Multiple Choice Questions
1. According to Rule 272 of The General Financial Rules, 2017, on what date should interest on external loans be paid?
- A) Within 30 days of the financial year end
- B) On the due date stipulated in the loan agreement
- C) At the discretion of the Ministry of Finance
- D) Quarterly, irrespective of agreement terms
Show Answer
Correct Answer: B) On the due date stipulated in the loan agreement
2. Under which Major Head are interest payments for external loans accounted for, as per Rule 272 of The General Financial Rules, 2017?
- A) 8658-Suspense Accounts
- B) 2049-Interest Payments
- C) 7610-Loans and Advances
- D) 1605-External Grant Assistance
Show Answer
Correct Answer: B) 2049-Interest Payments
3. How is the interest payment on external loans classified, according to Rule 272 of The General Financial Rules, 2017?
- A) Voted expenditure
- B) Capital expenditure
- C) Charged expenditure
- D) Non-recurring expenditure
Show Answer
Correct Answer: C) Charged expenditure
4. Rule 272 of The General Financial Rules, 2017, states that the procedure for transferring interest amounts is the same as that for which other financial transaction?
- A) Repayment of loans
- B) Receipt of grants
- C) Budget formulation
- D) Procurement of goods
Show Answer
Correct Answer: A) Repayment of loans
5. What is required to be in place for interest payments on external loans, as per Rule 272 of The General Financial Rules, 2017?
- A) A special parliamentary resolution
- B) A separate foreign currency account
- C) A budget provision made for this purpose
- D) Approval from the Comptroller and Auditor General
Show Answer
Correct Answer: C) A budget provision made for this purpose
Frequently Asked Questions
What is the primary requirement for paying interest on external loans under Rule 272 of The General Financial Rules, 2017?
The primary requirement is to pay interest on the due date as stipulated in the loan or credit agreements, against the specific budget provision made for this purpose.
How are interest payments on external loans classified in government accounts according to Rule 272 of The General Financial Rules, 2017?
They are classified as ‘charged expenditure’ and accounted for as a debit under the Major Head ‘2049-Interest Payments’ in the Consolidated Fund of India.
Does Rule 272 of The General Financial Rules, 2017, specify a unique procedure for transferring interest amounts?
No, Rule 272 states that the procedure for transferring interest amounts shall be the same as that followed for the repayment of loans, as referred to in Rule 271.
Key Takeaways
- Rule 272 mandates timely interest payments on external loans as per agreements.
- Interest payments are debited under Major Head ‘2049-Interest Payments’ in the Consolidated Fund of India.
- These payments are classified as charged expenditure, not requiring a legislative vote.
- The transfer procedure for interest mirrors that for loan principal repayments (Rule 271).
Conclusion
Rule 272 of The General Financial Rules, 2017, is fundamental to the transparent and disciplined management of India’s external financial obligations. By clearly defining the timing, accounting, and classification of interest payments, it ensures accountability and adherence to international financial commitments, reinforcing the government’s fiscal integrity.