Rule 104 of The General Financial Rules 2017 Interest Rate
Original Rule Text
Visual Summary
Interest is charged at specified rates on accounts.
Rule applies to all commercial departments or units.
Applicable only if separate capital and revenue accounts are maintained.
Executive Summary
Rule 104 of The General Financial Rules, 2017 mandates that interest, at rates specified by the Government, must be charged in the accounts of all Commercial Departments or units. This rule applies specifically to those entities that maintain separate capital and revenue accounts within the broader Government accounting framework. Exceptions to this general principle can be made only in special cases regulated by specific Government orders.
In-Depth Analysis of the Rule
Introduction
Rule 104 establishes a fundamental principle for financial management within Government accounts, specifically concerning the charging of interest. It ensures that commercial operations within the government framework operate with a clear financial discipline regarding capital usage.
Breakdown of the Rule
- Core Principle: Interest at specified rates must be charged in the accounts.
- Applicability: This rule applies to all Commercial Departments or units.
- Key Condition: The charging of interest is contingent upon these departments or units maintaining separate capital and revenue accounts within the Government accounts.
- Exceptions: Special cases may be regulated by specific Government orders, allowing for deviations from the general interest rate policy.
Practical Example
Consider a Government-owned commercial port authority that operates with its own distinct capital and revenue accounts. According to Rule 104 of The General Financial Rules, 2017, this port authority would be required to charge interest on its capital at rates specified by the Government. This ensures that the cost of capital utilized by the commercial entity is appropriately reflected in its financial statements, promoting accountability and efficient resource allocation, similar to a private commercial enterprise. If, however, a special government order is issued for a specific project within the port, that project’s interest rate might be regulated differently.
Related Provisions
Understanding Rule 104 is enhanced by examining other related provisions within the General Financial Rules, 2017:
- Rule 98 of The General Financial Rules 2017 Capital Expenditure: Defines capital and revenue expenditure, which is crucial for understanding the ‘separate capital and revenue accounts’ mentioned in Rule 104.
- Rule 99 of The General Financial Rules 2017 Principles for Allocation of Expenditure between Capital and Revenue: Provides guidelines for allocating expenditure, further clarifying the accounting context for Rule 104.
- Rule 105 of The General Financial Rules 2017 Charging of Interest on Capital Outlay: Details the specific conditions and rates for charging interest on capital outlay, directly following and elaborating on the principles set in Rule 104.
Learning Aids
Mnemonics
- I C C A: Interest Charged on Commercial Accounts.
Process Flowchart
Multiple Choice Questions (MCQs)
1. What is the primary purpose of Rule 104 of The General Financial Rules, 2017?
- A) To regulate the procurement of goods and services.
- B) To ensure timely payment of salaries to government employees.
- C) To mandate the charging of interest in accounts of commercial departments.
- D) To define capital and revenue expenditure for all government entities.
Show Answer
Correct Answer: C) To mandate the charging of interest in accounts of commercial departments.
2. To which entities does Rule 104 of The General Financial Rules, 2017 primarily apply?
- A) All Central Government Ministries and Departments.
- B) Only non-commercial government departments.
- C) Commercial Departments or units maintaining separate capital and revenue accounts.
- D) State Governments and Union Territories.
Show Answer
Correct Answer: C) Commercial Departments or units maintaining separate capital and revenue accounts.
3. What is a crucial condition for the application of Rule 104 of The General Financial Rules, 2017 regarding interest charges?
- A) The entity must be a Public Sector Undertaking.
- B) The entity must maintain separate capital and revenue accounts.
- C) The expenditure must be non-recurring.
- D) The interest rate must be fixed at 5% per annum.
Show Answer
Correct Answer: B) The entity must maintain separate capital and revenue accounts.
4. How are the interest rates determined for charging under Rule 104 of The General Financial Rules, 2017?
- A) They are fixed annually by the Comptroller and Auditor General of India.
- B) They are specified from time to time by the Government.
- C) They are decided by the individual commercial departments.
- D) They are based on prevailing market rates without government intervention.
Show Answer
Correct Answer: B) They are specified from time to time by the Government.
5. Under Rule 104 of The General Financial Rules, 2017, when can exceptions to the general interest rate policy be made?
- A) When a department requests a waiver due to financial hardship.
- B) Only in special cases regulated by specific orders of Government.
- C) When the interest amount is below a certain threshold.
- D) Never, as the rule is absolute.
Show Answer
Correct Answer: B) Only in special cases regulated by specific orders of Government.
Frequently Asked Questions
Q1: What is the primary objective of Rule 104 of The General Financial Rules, 2017?
A1: The primary objective is to ensure that commercial departments or units within the Government accounts are charged interest on their capital, promoting financial discipline and accountability for resource utilization.
Q2: Does Rule 104 apply to all government departments?
A2: No, Rule 104 specifically applies to Commercial Departments or units that maintain separate capital and revenue accounts within the Government accounts.
Q3: How are interest rates determined under Rule 104 of The General Financial Rules, 2017?
A3: The interest rates are specified from time to time by the Government. In special cases, these rates can be regulated by specific Government orders.
Key Takeaways
- Rule 104 mandates interest charges for commercial government entities.
- It applies only to Commercial Departments/units with separate capital and revenue accounts.
- Interest rates are determined by the Government and can be adjusted over time.
- Special Government orders can provide exceptions to the general rule.
Conclusion
Rule 104 of The General Financial Rules, 2017 is a critical provision for fostering financial accountability and commercial viability within government operations. By requiring commercial departments to account for the cost of capital through interest charges, it promotes efficient resource management and transparent financial reporting, aligning public sector commercial activities with sound economic principles.