Rule 253 of The General Financial Rules 2017 Loans Terms and Documentation
Original Rule Text
Visual Summary
Loans sanctioned at normal rates; concessions via direct subsidy.
Required for non-State/Govt. company loans, specifying terms.
Form GFR 15 undertaking for wholly Government-owned companies.
Executive Summary
Rule 253 of the General Financial Rules, 2017, outlines the procedures for sanctioning loans to various entities like State and Union Territory Governments, Local Bodies, Statutory Corporations, and Public Sector Undertakings. It specifies that loans are typically sanctioned at normal interest rates, but concessions can be provided as direct subsidies. Crucially, the rule mandates formal loan agreements for non-State Government and non-wholly Government-owned company borrowers, allowing the Government to inspect accounts. For wholly Government-owned companies, a written undertaking (Form GFR 15) is required before loan disbursement.
In-Depth Analysis of the Rule
Rule 253 of the General Financial Rules, 2017, provides essential guidelines for the sanctioning and documentation of loans extended by the Government to a diverse range of entities. This rule ensures transparency, accountability, and proper financial management in government lending operations.
Breakdown of the Rule:
- Sub-rule (1) – Loan Sanction and Interest: This section dictates that loans to State and Union Territory Governments, Local Bodies, Statutory Corporations, and Public Sector Undertakings are generally sanctioned at the normal interest rates. If a concession is deemed necessary, it is not granted by reducing the interest rate directly but by providing a direct subsidy. The subsidy is debited to the grants of the sanctioning authority, and the borrower is required to pay the normal interest first, claiming the subsidy separately.
- Sub-rule (2) – Agreements and Other Documentation: This sub-rule details the mandatory documentation for different types of loanees.
- (i) Loan Agreements: For loans to parties other than State Governments and wholly Government-owned companies, a formal loan agreement must be executed. This agreement must clearly specify all terms and conditions and, importantly, include a clause that enables the Government to call for and inspect the applicant’s accounts at any time.
- (ii) Written Undertaking (Form GFR 15): Wholly Government-owned companies are required to provide a written undertaking in Form GFR 15 when a loan is sanctioned. The sanction order must explicitly state this requirement, and the Drawing Officer of the sanctioning authority’s office must certify that this undertaking has been obtained before the loan amount is drawn.
Practical Example:
Imagine a State Government requests a loan from the Central Government for an infrastructure project. According to Rule 253 (1) of the General Financial Rules, 2017, the loan would be sanctioned at the standard interest rate. If the Central Government decides to offer a concession due to the project’s public benefit, it would provide a direct subsidy to the State Government, rather than lowering the interest rate on the loan itself. The State Government would pay the normal interest, and then claim the subsidy separately. Furthermore, for a Public Sector Undertaking (a wholly Government-owned company) seeking a loan, Rule 253 (2)(ii) mandates that it must provide a written undertaking in Form GFR 15, ensuring adherence to the loan terms and allowing the Government to monitor its financial activities related to the loan.
Related Provisions
Understanding Rule 253 is enhanced by examining related provisions concerning government loans and financial management:
- Rule 252 of The General Financial Rules 2017 Recovery of Loans and Interest and Moratorium: Details the procedures for loan recovery, interest payment, and conditions for moratorium.
- Rule 254 of The General Financial Rules 2017 Undertaking from Wholly Owned Government Companies: Specifically addresses the undertaking required from wholly Government-owned companies, directly referenced in Rule 253.
- Rule 255 of The General Financial Rules 2017 Loans Against Adequate Security: Specifies the requirement for adequate security when sanctioning loans to certain parties.
Learning Aids
Mnemonics:
- LSD-A: Loans, Subsidies, Documentation, Agreements. This helps remember the key aspects of Rule 253: how Loans are sanctioned, how Subsidies provide concessions, the need for proper Documentation, and formal Agreements.
Process Flowchart:
Multiple Choice Questions
1. What is the primary method for sanctioning loans to Public Sector Undertakings under Rule 253 (1) of the General Financial Rules, 2017?
- A) At concessional interest rates directly.
- B) At normal interest rates, with concessions as direct subsidies.
- C) Through interest-free loans.
- D) Only after a full parliamentary approval.
Show Answer
Correct Answer: B) At normal interest rates, with concessions as direct subsidies.
2. According to Rule 253 (1) of the General Financial Rules, 2017, if a concession is justified for a loan, how is it provided?
- A) By reducing the interest rate upfront.
- B) As a direct subsidy debitable to the sanctioning authority’s grants.
- C) By waiving the principal repayment.
- D) Through a special parliamentary resolution.
Show Answer
Correct Answer: B) As a direct subsidy debitable to the sanctioning authority’s grants.
3. For loans to parties other than State Governments and wholly owned Government Companies, what documentation is required under Rule 253 (2)(i) of the General Financial Rules, 2017?
- A) A simple promissory note.
- B) A verbal agreement with a competent authority.
- C) A loan agreement specifying all terms and conditions.
- D) Only a certificate of financial solvency.
Show Answer
Correct Answer: C) A loan agreement specifying all terms and conditions.
4. What specific power does a loan agreement, as per Rule 253 (2)(i) of the General Financial Rules, 2017, grant the Government?
- A) The power to unilaterally change interest rates.
- B) The power to call for accounts of the applicant and inspect books.
- C) The power to demand immediate full repayment without notice.
- D) The power to seize assets without judicial process.
Show Answer
Correct Answer: B) The power to call for accounts of the applicant and inspect books.
5. Which form of undertaking is required from a wholly Government-owned company at the time of sanctioning a loan, according to Rule 253 (2)(ii) of the General Financial Rules, 2017?
- A) Form GFR 10
- B) Form GFR 12-A
- C) Form GFR 15
- D) Form GFR 22
Show Answer
Correct Answer: C) Form GFR 15.
Frequently Asked Questions
How are loan concessions handled under Rule 253 of the General Financial Rules, 2017?
Concessions are provided as direct subsidies debitable to the sanctioning authority’s grants. Borrowers initially pay normal interest, then claim the subsidy separately.
What is the significance of Form GFR 15 in loan sanctions under Rule 253 (2)(ii) of the General Financial Rules, 2017?
Form GFR 15 is a written undertaking required from wholly Government-owned companies when sanctioning a loan. It ensures compliance with loan terms and allows for Government oversight.
Can the Government inspect the accounts of a loan applicant under Rule 253 (2)(i) of the General Financial Rules, 2017?
Yes, for loans to parties other than State Governments and wholly Government-owned companies, the loan agreement must include a clause enabling the Government to call for and inspect the applicant’s accounts.
Key Takeaways
- Rule 253 governs loan sanctions to various government-related entities, including State/UT Governments, Local Bodies, and PSUs.
- Loan concessions are structured as direct subsidies, not reduced interest rates, with borrowers paying normal interest first.
- Formal loan agreements are mandatory for non-State/Govt. company borrowers, granting the Government rights to inspect accounts.
- Wholly Government-owned companies must provide a specific written undertaking (Form GFR 15) before loan disbursement.
Conclusion
Rule 253 of the General Financial Rules, 2017, establishes a clear framework for loan sanctions, ensuring financial propriety and accountability. By detailing interest rate application, concession mechanisms, and mandatory documentation like loan agreements and specific undertakings, it safeguards public funds and provides necessary oversight for Government lending to diverse entities.