Rule 259 of The General Financial Rules 2017 Irrecoverable Loans
Original Rule Text
Visual Summary
Can remit or write off loans.
Required from Ministry of Finance.
Primary reason for remission/write-off.
Executive Summary
Rule 259 of The General Financial Rules, 2017, empowers a competent authority to remit or write off loans that are deemed irrecoverable. This action, however, is not unilateral and requires the prior approval of the Ministry of Finance. The rule ensures a structured approach to managing government loans that cannot be recovered, preventing indefinite outstanding liabilities while maintaining financial oversight.
In-Depth Analysis of the Rule
Rule 259 addresses the critical aspect of managing government loans that, for various reasons, become irrecoverable. It provides a formal mechanism for their remission or write-off, ensuring that such decisions are made judiciously and with proper authorization.
Breakdown of the Rule
- Competent Authority: The power to remit or write off irrecoverable loans is vested in a ‘competent authority’. This implies that the decision-making power is delegated to specific officials or bodies within the government structure, as defined by other rules or orders.
- Prior Approval of Ministry of Finance: A crucial safeguard is the mandatory requirement for ‘prior approval of the Ministry of Finance’. This ensures that decisions regarding the write-off of public funds are subject to central financial oversight and policy alignment, preventing arbitrary actions and maintaining fiscal discipline.
- Grounds for Remission/Write-off: The primary ground specified is ‘irrecoverability’. This refers to situations where, despite all reasonable efforts, a loan cannot be recovered. The rule also includes ‘or otherwise’, suggesting that other valid reasons, if approved by the Ministry of Finance, could also lead to such a decision.
- Purpose: The rule aims to clear the government’s books of outstanding liabilities that are no longer collectible, providing a realistic picture of financial assets and liabilities. It also allows for flexibility in cases where recovery might be counterproductive or impossible.
Practical Example
Imagine a government-backed loan provided to a small business that subsequently goes bankrupt due to unforeseen economic circumstances, and all legal avenues for recovery have been exhausted. In such a scenario, the relevant competent authority would prepare a proposal detailing the efforts made for recovery and the reasons for irrecoverability. This proposal would then be submitted to the Ministry of Finance for its prior approval to formally write off the loan, thereby removing it from the government’s active books.
Related Provisions
Understanding Rule 259 is enhanced by considering other related provisions within the General Financial Rules, 2017:
- Rule 258 of The General Financial Rules, 2017 Defaults in Payment: This rule outlines the procedure for dealing with defaults in loan payments, including the levy of penal interest, which precedes the consideration of a loan as irrecoverable.
- Rule 33 of The General Financial Rules, 2017 Report of Losses: This rule details the reporting mechanism for various types of losses, including those of public moneys, which could encompass irrecoverable loans.
- Rule 247 of The General Financial Rules, 2017 Powers and Procedure for Sanction of Loans: This rule sets the foundation for how loans are sanctioned, which is the initial step before any consideration of their recoverability.
Learning Aids
Mnemonics
- I.R.R.O.L.A.M.F. – Irrecoverable Remitted Rule Of Loans: Approval Ministry Finance.
Process Flowchart
Multiple Choice Questions
1. Who has the authority to remit or write off irrecoverable loans under Rule 259 of The General Financial Rules, 2017?
- A) The Head of Department
- B) The Accounts Officer
- C) A competent authority with prior Ministry of Finance approval
- D) The Comptroller and Auditor General
Show Answer
Correct Answer: C) A competent authority with prior Ministry of Finance approval
2. What is the mandatory condition for a competent authority to remit or write off loans under Rule 259 of The General Financial Rules, 2017?
- A) Approval from the President
- B) Prior approval of the Ministry of Finance
- C) Recommendation from the Audit Officer
- D) A court order declaring the loan irrecoverable
Show Answer
Correct Answer: B) Prior approval of the Ministry of Finance
3. Which of the following is the primary reason for remitting or writing off a loan as per Rule 259 of The General Financial Rules, 2017?
- A) The borrower requests it
- B) The loan is deemed irrecoverable
- C) The financial year is closing
- D) The loan amount is small
Show Answer
Correct Answer: B) The loan is deemed irrecoverable
4. Rule 259 of The General Financial Rules, 2017 primarily deals with:
- A) Sanctioning new government loans
- B) Recovering overdue loan payments
- C) Remitting or writing off irrecoverable government loans
- D) Auditing government financial transactions
Show Answer
Correct Answer: C) Remitting or writing off irrecoverable government loans
5. If a competent authority decides to write off a loan under Rule 259 of The General Financial Rules, 2017, whose approval is specifically required?
- A) The Prime Minister’s Office
- B) The Parliament
- C) The Ministry of Finance
- D) The State Government
Show Answer
Correct Answer: C) The Ministry of Finance
Frequently Asked Questions
What does ‘irrecoverable loans’ mean in the context of Rule 259 of The General Financial Rules, 2017?
It refers to loans that cannot be collected or recovered by the government despite all reasonable efforts, often due to factors like bankruptcy of the borrower, natural calamities, or other unforeseen circumstances.
Why is prior approval from the Ministry of Finance necessary for writing off loans under Rule 259 of The General Financial Rules, 2017?
This requirement ensures central financial oversight, consistency in policy application, and prevents arbitrary decisions regarding public funds. It maintains fiscal discipline and accountability in managing government assets.
Does Rule 259 of The General Financial Rules, 2017 apply to all types of government loans?
Yes, it applies to ‘any loans’ owing to their irrecoverability, implying a broad scope covering various types of loans extended by the government.
Key Takeaways
- Rule 259 empowers a competent authority to remit or write off irrecoverable government loans.
- Prior approval from the Ministry of Finance is mandatory for such actions.
- The primary ground for write-off is the irrecoverability of the loan.
- This rule ensures a formal and controlled process for managing uncollectible public funds.
Conclusion
Rule 259 of The General Financial Rules, 2017, is a vital provision for maintaining the integrity and accuracy of government financial records. By establishing a clear process for remitting or writing off irrecoverable loans with the necessary checks and balances, it ensures that public funds are managed responsibly, even in challenging circumstances where recovery is no longer feasible. This rule underscores the government’s commitment to transparent and accountable financial administration.