E- Governance Group-Group-IV

Grants-in-aid and Loans

Rule 206.

-As a general principle grants-in-aid can be given to a person or a public body or an institution having a distinct legal entity. Thus grants-in-aid including scholarships may be sanctioned by an authority competent to do so under the Delegation of Financial Powers Rules, 1978 to:

  • Institutions or organizations set up as Autonomous Organization under a specific statute or as a society registered under the Societies Registration Act, 1860 or Indian Trusts Act, 1882 or other statutes.
  • Voluntary organizations or Non-Government Organisations carrying out activities which promote the welfare schemes and programmes of the Government should be selected on the basis of well-deemed criteria regarding financial and other resources, credibility and type of activities undertaken.
  • Educational and other institutions by way of scholarships or stipends to the students.
  • Urban and Rural local Self-Government institutions.
  • Co-operative societies.
  • Societies or clubs set up by Government servants to promote amongst themselves social, cultural and sports activities as recreational avenue.

Rule 207.

- The Ministry or Department of the Central Government directly concerned with the aim or activity of the Institution should consider requests for grants-in-aid in consultation with the concerned Financial Adviser. The Financial Adviser may associate a representative of Ministry of Finance, wherever considered necessary.

Rule 208.

- General Principles for setting up of Autonomous Organizations referred to under Rule 206 (a)

  • No new autonomous institutions should be created by Ministries or Departments Without the approval of the Cabinet.
  • Stringent criteria should be followed for setting up of new autonomous organizations and the type of activities to be undertaken by them. The Ministry or Department should examine in detail; (a) whether the activities proposed to be taken up are necessary at all; (b) whether these activities, if necessary, need to be undertaken by setting up an autonomous organization only or whether these could be performed by the concerned Government agency or any other organization already existing.
  • All autonomous organizations, new or already in existence should be encouraged to maximized generation of internal resources and eventually attain self sufficiency.
  • Instead of giving recurring grants, wherever possible, the Ministry or Department may consider creating a Corpus Fund, the returns on investment of which, along with their internally generated resources should enable the autonomous organization to meet its revenue expenditure.
  • A system of external or peer review of autonomous organizations every three or five years depending on the size and nature of activity should be put in place. Such a review should focus, inter alia, on:
    • The objective for which the autonomous organization was set up and whether these objectives have been or are being achieved;
    • Whether the activities should be continued at all, either because they are no longer relevant or have been completed or if there has been a substantial failure in achievement of objectives. A zero-based budget approach should be followed in making this assessment.
    • Whether the nature of the activities is such that, these need to be performed only by an autonomous organization.
    • Whether similar functions are also being undertaken by other organizations, be it in the central Government or State Governments or the private sector, and if so, whether there is scope for merging or winding up the organizations under review.
    • Whether the total staff complement, particularly at the support level, is kept at a minimum, whether the enormous strides in information technology and communication facilities as also facilities for outsourcing of work on a contract basis, have been taken into account in determining staff strength; and whether scientific or technical personnel are being deployed on functions which could well be carried out by non-scientific or non-technical personnel, etc.
    • Whether user charges, wherever the output or services are utilized by others, are levied at appropriate rates.
    • The scope for maximizing internal resources generation in the organization so that the dependence upon Government budgetary support is minimized.

(vi) An organization whose performance is found to be outstanding and internationally acclaimed as a result of the review envisaged under (v) above should be granted greater autonomy and increased flexibility in matters of recruitment and financial rules thereby enabling it to devise and adopt staff structures, procedures and rules suited to improving their productivity.

(vii) Autonomous organizations as defined in (vi) above as also others with a budgetary support of more than Rupees five crores per annum, should be required to enter into a Memorandum of Understanding with the Administrative Ministry or Department, spelling out clearly the output targets in terms of details of programme of work and qualitative improvement in output, along with commensurate input requirements. The output targets, given in measurable units of performance, should form the basis of budgetary support extended to these organizations.

Rule 209.(1)

Principles and Procedure for award of Grants-in-aid- Any Institution or Organization seeking grants-in-aid from Government will be required to submit an application which includes all relevant information such as Articles of Association, bye-laws, audited statement of accounts, sources and pattern of income and expenditure, etc., enabling the sanctioning authority, to assess the suitability of the Institution or Organization seeking grant. The application should clearly spell out the need for seeking grant and should be submitted in such form as may be prescribed by the sanctioning authority. The Institution or Organization seeking grants-in-aid should also certify that it has not obtained or applied for grants for the same purpose or activity from any other Ministry or Department of the Government of India or State Government.

NOTE: In order to obviate duplication in grants-in-aid, each Ministry or Department should maintain a list of Institutions or Organizations along with details of amount and purpose of grants given to them on its website.

Rule 209.(2 )

The Internal Finance Wing of the Ministry or Department concerned should lay down the rules or pattern of assistance under the broad guidelines contained in this Chapter and instructions issued by the Ministry of Finance from time to time. All sanctions of grants-in-aid issued by a Ministry or Department of the Central Government or an Administrator in exercise of their powers under Rule 20 of the Delegation of Financial Powers Rule, 1978, as amended from time to time, should conform to the pattern of assistance or rules governing such grants-in-aid.

Rule 209.(3)

Award of grants should be considered only on the basis of ! viable and specific schemes drawn up in sufficient detail by the Institution or Organization. The budget for such schemes should disclose, inter-alia, the specific quantified and qualitative targets likely to be attained against the outlay.

Rule 209.(4)

Subject to the following terms and conditions, grants-in-aid towards administrative expenditure may be sanctioned to voluntary organizations to ensure a certain minimum staff structure and qualified personnel to improve their effectiveness and expand their activities under the following conditions:

  • The grants-in-aid should not exceed twenty- five per cent of approved administrative expenditure on pay and allowances of the personnel of the voluntary organization concerned;
  • Grants-in-aid to meet administrative expenditure to any private institutions other than the voluntary organizations should not ordinarily be sanctioned. In exceptional cases such grants can be considered for sanction in consultation with Internal Finance Wing.

Rule 209.(5)

Every order sanctioning a grant shall indicate whether it is recurring or non-recurring and specify clearly the object for which it is being given and the general and special conditions, if any, attached to the grant. In the case of non-recurring grants for specified object, the order shall also specify the time limit within which the grant or each instalment of it, is to be spent.

Rule 209.(6)

  • The sanctioning authority may prescribe conditions regarding quantum and periodicity for release of Grants-in-aid in installments in consultation with the Financial Adviser. However, the release of the last installment of the annual grant must be conditional upon the grantee institutions providing reasonable evidence of proper utilization of installments released earlier.
  • In order to avoid delay in sanction or release of grants-in-aid to the grantee Institutions, the Ministry or Department should impress upon Institution or Organization desiring grants from Government, to submit their requirement with supporting details by the end of October in the year preceding the year for which the grants-in-aid is sought. The Ministry or Department should fmalize their examination of the requests with the utmost expedition and make the necessary budget provision where it is decided to sanction grants. The Institution or Organization should be informed of the result of their requests by April of the succeeding year.
  • When recurring grants-in-aid are sanctioned to the same Institution or Organization for the same purpose, the unspent balance of the previous grant should be taken into account in sanctioning the subsequent grant.
  • All grantee Institutions or Organizations which receive more than fifty per cent of their recurring expenditure in the form of grants-in-aid, should ordinarily formulate terms and conditions of service of their employees which are, by and large, not higher than those applicable to similar categories of employees in Central Government. In exceptional cases relaxation may be made in consultation with the Ministry of Finance.
    • All grantee Institutions or Organizations which receive more than fifty per cent of their recurring expenditure in the form of grants-in-aid, should ordinarily formulate terms and conditions of service of their employees which are, by and large, not higher than those applicable to similar categories of employees in Central Government. In exceptional cases relaxation may be made in consultation with the Ministry of Finance.
    • Grantee Institutions or Organizations should be encouraged to take advantage of the pension or gratuity schemes or group insurance schemes or house buildings loans or vehicle loans schemes, etc., available in the market for employees instead of undertaking liability on their own or Government account.
  • In making grants to non-Government or quasi-Government Institutions or Organizations, a condition should be laid down that assets acquired wholly or substantially out of Government grants, except those declared as obsolete and unserviceable or condemned in accordance with the procedure laid down the General Financial Rules, shall not be disposed of without obtaining the prior approval of the authority which sanctioned the grants-in-aid.
  • The sanctioning authority, while laying down the pattern of assistance, may decide whether the ownership of buildings constructed with grants-in-aid may vest with Government or the grantee Institution or Organization. Where the ownership is vested in the Government, the grantee Institution or Organization may be allowed to occupy the building as a lessee. In such cases suitable record of details of location, cost, name of lessee and terms and conditions of lease must be maintained in the records of the granting Ministry or Department. In all cases of buildings constructed with grants-in-aid, responsibility of maintenance of such buildings should be laid on the grantee Institution or Organization.
  • Grants-in-aid may be sanctioned to meet the bona fide expenditure incurred not earlier than a year prior to the date of issue of the sanction.
  • Before a grant is released, the members of the executive committee of the grantee should be asked to execute bonds in a prescribed format binding themselves jointly and severally to:
    • Abide by the conditions of the grants-in-aid by the target dates, if any, specified therein; and
    • Not to divert the grants or entrust execution of the scheme or work concerned to another Institution(s) or Organization(s); and
    • Abide by any other conditions specified in the agreement governing the grants-in-aid.
  • In the event of the grantee failing to comply with the conditions or committing breach of the conditions of the bond, the signatories to the bond shall be jointly and severally liable to refund to the President of India, the whole or a part amount of the grant with interest at ten per cent per annum thereon or the sum specified under the bond. The stamp duty for this bond shall be borne by the Government.
  • Execution of bond will not apply to quasi-Government Institutions, Central Autonomous Organizations and Institutions whose budget is approved by Government.
  • The stipulation in regard to refund of the amount of grant-in-aid with interest thereon should be brought out clearly in the letter sanctioning the grant as well as in the bond so required to be executed.

xii) (a) As a pre-condition to the sanction of grants-in-aid to the agencies where:-

(aa) the recipient body employs more than twenty persons on a regular basis and at least fifty per cent. of its recurring expenditure is met from grants-in-aid from Central Government; and

(ab) the body is a registered society or a co-operative institution and is in receipt of a general purpose annual grants-in-aid of Rupees twenty lakhs and above from the Consolidated Fund of India;

the grant sanctioning authority should ensure that a suitable clause is invariably included in the terms and conditions under which the grants-in-aid are given, to provide for reservation for Scheduled Castes and Scheduled Tribes or OBC in posts and services under such organizations or agencies. The relative provision may be on the following lines:

"..........(Name of Institution or Organization etc.) agrees to make reservations for Scheduled Castes and Scheduled Tribes or OBC in the posts or services under its control on the lines indicated by the Government of India.

(b) While sanctioning grants-in-aid to Institutions or Organizations referred to in (a) above, the grant sanctioning authority should keep in view the progress! made by such Institutions or Organizations in employing Scheduled Castes and Scheduled Tribes or OBC candidates in their services.

(xiii) Central Autonomous Organizations, which receive Plan grants as well as Non-Plan grants, should account for expenditure (Capital and Revenue) separately under Plan and Non-plan. The Government of India, Ministry of Finance has formulated standard formats for presentation of [mal accounts, for all Central Autonomous Organizations. All grant sanctioning authorities should enforce the condition of maintaining and presenting their annual accounts in the standard formats on all Central Autonomous Organizations.

(xiv) The grant sanctioning authorities should not only take into account the internally generated resources while regulating the award of grants but should consider laying down targets for internal resource generation by the grantee Institutions or Organizations every financial year, particularly where grants are given on a recurring basis year after year.

Rule 210.

- Accounts of Grantee Institutions- Institutions or Organizations receiving grants should, irrespective of the amount involved, be required to maintain subsidiary accounts of the Government grant and furnish to the Accounts Officer a set of audited statement of accounts. These audited state-ments of accounts should be required to be furnished after utilization of the grants-in-aid or whenever called for.

Rule 211.(1)

Audit of Accounts of Grants-in-aid- The accounts of all grantee Institutions or Organizations shall be open to inspection by the sanctioning authority and audit, both by the Comptroller and Auditor-General, of India under the provision of CAG(DPC) Act 1971 and internal audit by the' Principal Accounts Office of the Ministry or Department, whenever the Institution, or Organization is called upon to do so and a provision to this effect should invariably be incorporated in all orders sanctioning grants-in-aid.

Rule 211.(2)

  • The accounts of the grantee Institution or Organization shall be audited by the Comptroller and Auditor-General of India under Section 14 of the Comptroller and Auditor-General of India (Duties, Powers and Conditions of Service) Act, 1971, if the grants or loans to the institution in a financial year are not less than Rupees twenty-five lakhs and also not less than seventy-five per cent. of the total expenditure of the Institution. The accounts may also be audited by the Comptroller and Auditor-General of India if the grants or loans in a financial year are not less than Rupees one crore. Where the accounts are so audited by the Comptroller and Auditor-General of India in a financial year, he shall continue to audit the accounts for a further period of two years notwithstanding that the conditions outlined above are not fulfilled.
  • Where any grant and loan is given for any specific purpose to any Institution or Organization or authority, not being a foreign State or international Body I Organization, the Comptroller and Auditor-General is competent under Section 15 (1) of the CAG's (DPC) Act, 1971, to scrutinize the procedures by which the sanctioning authority satisfies itself as to the fulfillment of the conditions subject to which such grants and/or loans were given and shall, for this purpose, have right of access to the books and accounts of that Institute or Organization or authority.

Rule 211(3)

In all other cases, the Institution or Organization shall get it accounts audited from Chartered Accountants of its own choice.

Rule 211.(4)

Where the Comptroller and Auditor-General of India is the; sole auditor for a local Body or Institution, auditing charges will be payable by the audited Institution in full unless specifically waived by Government.

Rule 212.(1)

Utilization Certificates:

In respect of non-recurring grants .to an Institution or Organization, a certificate of actual utilization of the grants received for the purpose for which it was sanctioned in Form GFR 19-A, should be insisted upon in the order sanctioning the grants-in-aid. The Utilization Certificate in respect of grants referred to in Rule 209 (6) should also disclose whether the specified, quantified and qualitative targets that should have been reached against the amount utilized, were in fact reached, and if not, the reasons therefore. They should contain an output-based performance assessment instead of input-based performance assessment. The Utilization Certificate should be submitted within twelve months of the closure of the financial year by the Institution or Organization concerned. Receipt of such certificate shall be scrutinized by the Ministry or Department concerned. Where such certificate is not received from the grantee within the prescribed time, the Ministry or Department will be at liberty to black-list such Institution or Organization from any future grant, subsidy or other type of financial support from the Government. This fact should also be put on the website referred to in the Note under Rule 209 (1) above.

In respect of recurring grants, Ministry or Department concerned should release any amount' sanctioned for the subsequent financial year only after Utilization Certificate in respect of grants of preceding financial year is submitted. Release of grants- in-aid in excess of fifty per cent of the total amount sanctioned for the subsequent financial year shall be done only after the annual audited statement relating to grants-in-aid released in the preceding year are submitted to the satisfaction of the Ministry / Department concerned. Reports submitted by the Internal Audit parties of the Ministry or Department and inspection reports received from Indian Audit and Accounts Department and the performance reports if any received for the third and fourth quarter in the year should also be looked into while sanctioning further grants.

NOTE 1: Utilization certificates need not be furnished in cases where the grants- in-aid are being made as reimbursement of expenditure already incurred on the basis of duly audited accounts. In such cases, the sanction letters should specify clearly that the utilization certificates will not be necessary.

NOTE 2: In respect of Central Autonomous Organizations, the Utilization Certificate shall disclose separately the actual expenditure incurred and the Loans and Advances given to suppliers of stores and assets, to construction agencies, to staff(for house building and purchase of conveyance, etc.), which do not constitute expenditure at that stage. These shall be treated as unutilized grants but allowed to be carried forward. While regulating the grants for the subsequent year, the amounts carried forward shall be taken into account.

Rule 212.(2)

In the case of private and voluntary organizations receiving recurring grants-in-aid from Rupees ten lakhs to Rupees twenty-five lakhs, all the Ministries or Departments of Government of India should include in their annual report a statement showing the quantum of funds provided to each of those organizations and the purpose for which they were utilized, for the information of Parliament. The annual reports and accounts of private and voluntary organizations receiving recurring grants-in-aid to the tune of Rupees twenty-five lakhs and above should be laid on the Table of the House within nine months of the close of the succeeding financial year of the grantee organizations.

In the case of organizations receiving one-time assistance or non-recurring grants as grants-in-aid from Rupees ten lakhs to Rupees fifty lakhs all Ministries or Departments of Government of India should include in their annual reports, statements showing the quantum of funds provided to each of these organizations and the purpose for which the funds were utilized, for the information of Parliament. The annual reports and audited accounts of private and voluntary organizations or societies registered under the Registration of Societies Act, 1860, receiving one-time assistance / non-recurring grants of Rupees fifty lakhs and above should also be laid on the Table of the House within nine months of the close of the succeeding financial year of the grantee Organisations.

Rule 212.(3) Submission of Achievement-cum-Performance Reports:

  • The grantee Institutions or Organizations should be required to submit performance-cum-achievement reports soon after the end of the financial year. A time-limit may in this regard be prescribed by the sanctioning authority concerned. This requirement should be included in the grants-in-aid sanction order.
  • In regard to non-recurring grants such as those meant for celebration of anniversaries, conduct of special tours and maintenance grants for education, performance-cum-achievement reports need not be obtained.
  • In the case of recurring grants, submission of achievement-cum performance reports should usually be insisted upon in all cases. However, in the case of grants-in-aid not exceeding Rupees five lakhs, the sanctioning authority may dispense with the submission of performance-cum-achievement reports and should, in that event, refer to the utilization certificates and other information available with it with a view to deciding whether or not the grants-in-aid should continue to be given.
  • The annual reports and audited statements of accounts of Autonomous Organizations are required to be laid on the table of the Parliament. In such cases, the Ministries or Departments of Central Government need not incorporate performance-cum-achievement reports in the annual reports. In all other cases, if the grants-in-aid exceed Rupees twenty-five lakhs, the Ministry or Departments of the Central Government should include in their annual report a review of the utilization of the grants-in-aid individually, specifying in detail the achievements vis-a-vis the amount spent, the purpose and destination of the grants. In cases where the grants-in-aid are for Rupees twenty-five lakh or less, the Ministry or Departments of the Central Government should include in their annual report their own assessment of the achievements or performance of the Institution or Organizations.
  • Where the accounts of the grantee Institutions or organizations are audited by the Indian Audit and Accounts Department, copies of the performance-cum-achievement reports, furnished by the grantee institution to the Administrative Ministry or sanctioning authority should be made available to audit. In other cases copies of such reports, received by the Departments of the Central Government or the sanctioning authority should be made available to audit when local audit of such grants- in-aid in the Administrative Ministry or Department or sanctioning authority is conducted or when it is called for by the Accountant General.

Rule 212.(4) Register of Grants:

  • A Register of Grants shall be maintained by the sanctioning authority in the format given in Form GFR -39.
  • Columns (i) to (v) of the register in format at Form GFR -39 should be filled in simultaneously with the issue of the order sanctioning each grant. These columns should be attested by any Gazetted Officer nominated for the purpose by the sanctioning authority. The serial number should be recorded on the body of the sanction at the time the item is entered in the Register as under:
    "Noted at serial No in the Register of Grants".
  • Such a record will guard against the possibility of double payment. Columns (vi) and (vii) should be filled in and attested by the Gazetted Officer concerned as soon as the bill is ready. The bill should then be submitted to the Gazetted Officer nominated to act as Drawing and Disbursing Officer with the register for signing the bill and to the sanctioning authority for giving dated initials in Column (viii) of Register. It should also be the duty of the sanctioning authority to verify that the conditions, if any, attached to the grant have been duly accepted by the grantee without any reservation and that no other bill for the same purpose has already been paid before. No bill should be signed unless it has been noted in the Register of Grants against the relevant sanction. This will also facilitate watching of payments in instalments, if any, in the case of lump sum sanctions. Information at Column (xiii) of the Form GFR-39 above should be used also for regulating the subsequent grants.

Rule 212.(5)

State Government to submit utilization certificate when expenditure incurred through local bodies: When Central grants are given to State Governments for expenditure to be incurred by them through local bodies or private institutions, the utilization certificates should be furnished by the State Government concerned.

Rule 213. Discretionary Grants:

When an allotment for discretionary grants is placed at the disposal of a particular authority, the expenditure from such grants shall be regulated by general or special orders of the competent authority specifying the object for which the grants can be made and any other condition(s) that shall apply to them. Such discretionary grants must be non- recurring and not involve any future commitment.

Rule 214. Other Grants:

Grants, subventions, etc., including grants to States other than those dealt with in the foregoing rules, shall be made under special orders of Government.

Rule 215.(1) Regulation of recurring grants-in-aid for Government employees' welfare:

1. Grants-in-aid for provision of amenities or of recreational or welfare facilities to the staff of the offices of the Government are regulated under orders of the Ministry of Home Affairs issued from time to time. The admissibility of the grants-in-aid for the welfare of the employees of th Government should be regulated in the following manner:

(i) The grant in aid will be admissible on the basis of the total strength borne on the regular strength of an organization, i.e., Ministry or Department, etc., and its Attached and Subordinate Offices and such statutory bodies whose budget forms part of Consolidated Fund of India, irrespective of the fact whether any individual is a member of the staff club, etc., or not. However, grant-in-aid in respect of Gazetted Officers will be admissible only to that Ministry or Department or Office where membership of recreation club is open to such officers. Staff paid from contingencies, work-charged staff etc., will not be taken into calculation for this purpose. Staff eligible for similar concession under some other rule or statutory provision, e.g., industrial workers will also not be covered by these orders.

(ii) Amounts of grants- in-aid.- (a) The rate of the grant-in-aid will be Rupees fifty per head per annun1. In addition to this, an additional grant-in-aid up to Rupees twenty-five per head per annum to match the subscriptions collected during the previous financial year by the existing staff clubs will be admissible. In the case of staff clubs which are started during the financial year in which grant-in-aid is to be given, an additional matching grants-in-aid up to Rupees twenty-five per head per annum, to match the subscription collected by such clubs up to the date on which the proposal for the grant is mooted, may be sanctioned. The total strength of the eligible staff will be that existing on the thirty-first March of the previous financial year or that on the date on which proposal for grant is mooted in the case of new staff clubs.

(iii) An illustrative list of items on which expenditure can be incurred out of grants-in-aid sanctioned by Government for provision of amenities is given below:

  • Articles of sports -Outdoor and indoor games equipment.
  • Cost of uniforms, etc., supplied to teams of players.
  • Magazines and periodicals.
  • Entry fee for tournaments.
  • Hiring of playgrounds.
  • Hiring and repair for furniture, etc.,
  • Purchase of furniture.
  • Conveyance expenses incurred locally.
  • Entertainment.
  • Prizes.
  • Film shows.
  • Hiring of accommodation for Club/Association, etc.
  • Cultural, Sports and Physical development programme(s).
  • Inter-Ministry meets.
  • Inter-Departmental meets.

2. A maximum one time grant of Rupees fifty thousand may be sanctioned for setting up of a Recreation Club

3. Grants-in-aid to the Ministry or Departments of the Central Government and their Attached and Subordinate Offices will be allocated by the Concerned Ministry or Department on receipt of formal requests in the prescribed manner. For the purposes of these grants-in-aid, the Departments of the Central Government and their attached and Subordinate Offices will be treated as a single unit. It will be the responsibility of that Ministry or Department to distribute the amount further to its Attached and Subordinate Offices and to their different clubs. The accounts of these clubs for the preceding year duly audited by an Internal Auditor should be obtained immediately after the close of the financial year in any case by the thirtieth April by the Ministry or Department before allocating funds for the next financial year.

4. Grants-in-aid for the provision of amenities or recreational or welfare facilities to the staff of the Indian Audit and Accounts Department are regulated by separate orders.

Rule 215.(2) General Principles for award of Grants-in-aid for Centrally Sponsored Schemes:

The following principles should be kept in view by Ministries / Departments of the Central Government at the time of designing or Union Territories and approving and releasing assistance to State Governments or Union Territories for such schemes:

  • Every Centrally Sponsored Scheme should be treated as a Project with time bound targets for monitoring, mid-term evaluation and detailed impact studies.
  • The scheme should be designed in consultation with individual States or Union Territories and the outlays should be demand driven. States should be delegated adequate powers to change the details of the schemes to suit-local conditions, subject to reporting such changes to the concerned Ministry or Department.
  • Where plan schemes are in operation with similar objectives targeting the same population, the schemes should be converged and the schemes not yielding results should be weeded out.
  • To ensure monitoring and effective control over such schemes, the number of schemes should be restricted, so that the gain from the expenditure on such schemes is maximized. The role of the Central Ministries or Departments should be capacity building, inter-sectoral coordination and detailed monitoring.
  • Apart from making provisions in the budget and releasing funds, the Ministries or Departments should establish a mechanism to ensure that the funds earlier released have been effectively utilized and that the data and facts reported by the State Governments or Union Territories relating to physical and financial performance are correct. Before releasing further funds, it should also be ensured that the State Governments or Union Territories have the capacity to actually spend the balance from the previous years and the releases during the current year.
  • The Ministries or Departments should focus attention on the attainment of the objectives and not on expenditure only. A mechanism for avoiding release of large part of funds towards the end of the year should be devised and incorporated in the Scheme design itself.
  • An evaluation mechanism should be built into the Project, providing for concurrent reviews and applying, mid-course corrections where necessary.
  • A post-completion review of every Centrally Sponsored Scheme should be undertaken by the State Govemment(s) or Union Territories implementing the scheme, highlighting the time and cost overruns, if any, and suggestions for formulating and implementing future schemes. A copy of the review should be obtained by the Ministry concerned and kept in view while formulating new Centrally Sponsored Schemes.

Rule 215.(3) Funding of Sponsored Projects or Schemes:

(1) Ministries or Departments of Government sponsor projects or schemes to be undertaken by Universities, Indian Institutes of Technology and other similar autonomous organizations such as ICAR, CSIR, ICMR etc., the results from which are expected to be in national interest. Normally the entire expenditure on such projects or schemes including capital expenditure, is funded by the Ministry or Department. The funds released for such projects or schemes in one or more instalments are not treated as grants-in-aid in the books of the implementing agency. Apart from the requirement of submission of technical and financial reports on completion of the project or scheme, a stipulation should be made in such cases that the ownership in the physical and intellectual assets created or acquired out of such funds shall vest in the sponsor. While the Project or Scheme is ongoing, the recipients should not treat such assets as their own assets in their Books of Accounts but should disclose their holding and using such assets in the Notes to Accounts specifically.

(2) On completion of the Projects or Schemes and the receipt of technical and financial reports, the Ministries or Departments should decide and communicate to the implementing agencies whether the assets should be returned, sold or retained by them.

(3) If the assets are to be sold, the proceeds there from should be credited to account of the sponsor. If the assets are allowed to be retained by the Institution / Organization, the implementing agency should include the assets at book value in their own accounts.

II. LOANS

Rule 216.

The rules in this section shall be observed by all authorities competent to sanction loans of public moneys to State Governments, Local Administrations of Union Territories, local bodies, private individuals, institutions and others.

Rule 217.

Powers and Procedure for sanction of loans.- The powers of Departments of the Central Government and Administrators as well as other subordinate authorities to sanction loans are contained in Rule 20 of the Delegation of Financial Powers Rules, 1978 and other general and special orders issued under that rule.

Rule 218.

All sanctions of loans issued by a Department of Central Government or an Administrator in exercise of their powers under Rule 20 of the Delegation of Financial Powers Rules, 1978, should include a suitable certificate to the effect that the same is in accordance with the rules or principles prescribed with the previous consent of the Ministry of Finance and that the rate of interest on the loan and the period of repayment thereof have been fixed with the approval of that Ministry.

Rule 219.

(1) All sanctions to loans shall be subject to proviso (b) to Rule 20 of the Delegation of Financial Powers Rules, 1978, and shall specify the terms and conditions relating to them including the terms and conditions of their repayment and payment of interest.

Rule 219.

(2) Borrowers shall be required to adhere strictly to the terms settled for the loans made to them. Modifications of these terms in their favour can be made subsequently only for very special reasons.

Rule 220.(1)

General conditions for regulating all loans.- All loans, other than loans to cultivators, etc., which are governed by special rules, should be regulated by the following general conditions :-

  • A specific term should be fixed which should be as short as possible, within which each loan should be fully repaid with interest due. The terms may, in very special cases, extend to thirty years.
  • The term is to be calculated from the date on which the loan is completely drawn or declared by competent authority to be closed.
  • The repayment of loans should be effected by instalments, which should ordinarily be fixed on annual basis, due dates of payment being specially prescribed.
  • Any instalment paid before its due date may be taken entirely towards the principal, provided it is accompanied by payment toward interest due up-to-date of actual payment of instalment; if not, the amount of the instalment will fIrst be adjusted towards the interest due for preceding and current periods and the balance if any, will alone be applied towards the principal. If, however, the payment of the instalment is in advance of the due date by fourteen days or less, interest for the full period (half-year or full year, as the case may be) will be payable.
  • When the due date of repayment of any instalment of principal or interest falls on a Sunday or a public holiday, the payment made on the next working day following the Sunday or the public holiday, shall be regarded as payment on the due date and no interest shall be charged for the day or days by which the recovery is so postponed.
    EXCEPTION: 1f an instalment of principal or interest is payable on the thirty-first March of a year, and if that day happens to be a public holiday the recoveries should be made on the immediately preceding working day. In case, the due date for the repayment of a loan or payment of interest falls on a holiday observed by the Reserve Bank of India, at which the effective credit is to take place this should be shifted to the next working day, except when the due date is thirty-fIrst March.
  • The payment of interest and the repayment of principal of a loan are always to be made with reference to the calendar date on which the loan in question is paid. However, where payment of instalment is in advance of the due date by fourteen days or less, interest for the full year or half year (depending on the prescribed mode of recovery) will be charged thereon. In the case of a loan sanctioned by the Central Government to a State Government on or before thirty-fIrst March of a year, which is adjusted in the books of the Reserve Bank of India in the month of April but in the accounts of the previous year the instalment of principal and/or interest will fall due for payment on the thirty-fIrst March of the succeeding year and not on the anniversaries of the calendar date in April on which the inter-Governmental adjustment was carried out.
  • The date of drawal of a loan by a State Government will be determined as indicated below-
    • When monetary settlement is involved.- Normally the calendar date on which amount of a loan is actually credited to the account of the State Government by the Reserve Bank is to be treated as the date of its drawal.
      This position will also hold in cases where adjustment in accounts is made in one month but date of adjustment in the books of the Reserve Bank of India falls in the following calendar month. The calendar date on which the credit is actually afforded to the State Government in the books of the Reserve Bank of India in such cases will be treated as the date of its drawal.
      EXCEPTION: An exception to this arrangement is in the case of loans for which credit is afforded to the recipient State Government in the month of April by the Reserve Bank of India but in the accounts of previous year. In such cases, a loan should be deemed to have been paid on the thirty-first March of the financial year in the accounts of which the payment is adjusted. Consequently, payment of annual interest as also repayment of instalment of principal in respect of such loans will fall due on the thirty first March of the succeeding years and not on the anniversaries of the calendar date in April on which inter-Governmental adjustment on account of such loans was carried out in the books of the Reserve Bank of India.
    • Where no monetary settlement is involved In regard to cases where adjustment in the books of the Accounts Offices are only involved and actual credit through the Reserve Bank of India is not necessary, the last date on the month of account in which the adjustment is effected should be taken as the date of drawal of loan for purposes of repayment and charging interest.
  • In order to avoid any default in the payment of loan, the Principal Accounts Officers or Pay and Accounts Officers who maintain the detailed accounts of loans, should issue notices in Form GFR-36 to the loanees (other than State and Union Territory Governments) i.e., Public Sector Undertakings, statutory bodies and institutions etc., say, a month in advance of the due date for the repayment of any instalment of the principal and/ or interest thereon. However, omission to give notice does not give the loanees any claim to exemption from the consequences of default in the repayment of the principal and/or interest thereon.

Rule 220.(2)

Before sanctioning a loan to private Institutions, the lending Ministry or Department should ensure that such private institution has the necessary adequate managerial ability and experience.

(i) Before considering a loan application from parties other than State Governments and Local Administrations of Union Territories, the following requirements should be fulfilled:

  • it should be seen that there is adequate budget provision;
  • it should be seen whether the grant of the loan would be in accordance with approved Government policy and accepted patterns of assistance.

(ii) Before approving the loan, the applicant should be asked to furnish the following materials and information:

  • copies of profit and loss (or income and expenditure) accounts and balance sheets for the last 3 years;
  • the main sources of income and how the loan is proposed to be repaid within the stipulated period;
  • the security proposed to be offered for the loan together with a valuation of the security offered by an independent authority and a certificate to the effect that the asset offered as security is not already encumbered.
  • Details of loan or loans taken from the Central Government or a State Government in the past, indicating amount, purpose, rate of interest, stipulated period of repayment, date of original loan and amount outstanding against the loan(s) on the date of the application and the assets, if any, given as security;
  • a complete list of all other loans, outstanding on the date of application and the assets given as security against them;
  • the purpose for which the loan is proposed to be utilized and the economics of the scheme.

NOTE: Where the loan is to be given to an institution on the strength of a guarantee given by the trust managing it, similar information should be called for in respect of the trust also.

(iii) On receipt of the information called for as mentioned in (ii) above, confidential enquiries should be made from the other Departments of the Central Government or State Governments from which the party has taken loans, to judge the performance in regard to the previous loans. If the replies indicate that the performance was not satisfactory, the loan should be refused. It must be analyzed that the financial position of the party is sound. It should also be ensured that the security offered is adequate and its value is at least thirty-three and one-third percent above the amount of the loan. If possible, an independent valuation of the security offered should be obtained. The applicant for the loan must satisfy both the criteria for financial soundness and adequacy of security before a loan is sanctioned.

(iv) In the case of institutions which receive grants-in-aid from Government to meet a part of their deficits and the balance is met by the State Government and the Trustees of Management, it should be ensured-

  • that in computing the deficit for purpose of the grant-in-aid, the income from the scheme, if any, earmarked for servicing the loan and the instalment of repayment of the loan and interest (if any) is not included;
  • that as far as possible the scheme for which the loan is given is self-financing and does not throw an additional burden on the general income of the institutions, e.g., in the case of hostels for colleges that the rents proposed are adequate;
  • the institution produces an undertaking from the State Government or the Management that any shortfall towards repayment of the loan and interest will be made good by them. In the latter case, the financial position of the Management (Trust) should be investigated after calling for information on the lines of Rule 220. (3) (i) above.

v) Ministries or Departments of the Central Government should lay down a procedure for periodical review of the old loans so that prompt action can be taken, if necessary, for enforcing regular payments.

Rule 220.(4)

The detailed procedure to be followed in connection with the grant of loans to local bodies will be regulated by the provisions of the Local Authorities Loans Act and other special Acts and by rules made thereunder.

Rule 221.(1)

Interest on Loans.- Interest shall be charged at the rate prescribed by the Government for any particular loan or for the class of loans concerned.

Rule 221.(2)

A loan shall bear interest for the day of payment but not for the day of repayment. Interest for any shorter period than a complete year shall be calculated as-

Number of days X Yearly rate of interest

----------------------------------------------------------------------------------------------------------------------

365 (366 in case of Leap Year)

unless any other method of calculation is prescribed in any particular case of class of cases.

Rule 222.(1)

Procedure to be followed for recovery of loans and interest thereon and grant of moratorium: The instructions issued by the Ministry of Finance from time to time prescribing the interest rates and other terms and conditions of loans to State and Union Territory Governments, Local Bodies, Statutory Corporations, financial, industrial and commercial undertakings in the

Public Sector, Private institutions or parties and individuals, should be strictly followed.

Rule 222.(2)

The recovery of loans should ordinarily be effected in annual equal instalments of principal together with interest due on the outstanding amount of principal from time to time. The repayment and interest instalments may be rounded off to the nearest rupee subject to final adjustment at the time of payment of last instalment of principal and/or interest.

Rule 222.(3)

A suitable period of moratorium towards repayment might be agreed to in individual cases having regard to the projects for which the loans are to be utilized. However, no moratorium should ordinarily be allowed in respect of interest payable on loans.

Rule 223.(1)

Loans to State and Union Territory Governments, Local Bodies, Statutory Corporations, Public Sector Undertakings, Private Institutions or Parties and Individuals, etc.- Loans should ordinarily be, sanctioned at the normal rates of interest prescribed by Government for the particular category of the loanee. In cases where the normal rate is considered too high and a concession is justified, it should take the form of direct subsidy debitable to the grants of the sanctioning authority. In such cases interest should, however, be paid by the borrower in the first instance at the normal rates and subsidy should be claimed separately:

Provided that the provisions of this decision should not apply where the number of borrowers is very large and amount of individual loans is comparatively small (as in the case of loans to displaced persons, taccavi loans, loans for land improvement, etc.) and where the accepted policy is to lend money at rates of interest below the normal rates, or to waive the recovery of interest in whole or in part. In such cases, a token provision should be made in the budget of the Department or Office concerned for obtaining the specific approval of Parliament for the grant of the concession. No actual adjustment of accounts will, however, be necessary in such cases.

Rule 223.(2) (2 ) Agreements and other documentation.-

(i) In the case of loans to parties other than State Governments and wholly owned Government Companies, a loan agreement specifying all the terms and conditions shall be executed. A clause shall invariably the inserted in all such agreements enabling Government at any time to call for accounts of the applicant relating to any accounting year with power to depute an officer specially authorized for this purpose to inspect the applicant's books, if necessary.

(ii) A written undertaking in Form GFR 32 should be obtained from a wholly Government-owned company at the time of sanctioning the loan. The sanction should specifically state that such ~n undertaking would be obtained from the loanee before the drawal of the amount of loan and a certificate that the undertaking has been obtained should be recorded by the Drawing Officer of the office of the sanctioning authority in the bill for drawal of the amount of loan. The sanction in respect of loans to other organizations, where a formal agreement is required to be executed, will also be issued in the same manner.

(iii) In the case of loans sanctioned to the Departmental or Cooperative canteens or tiffins rooms in Central Government Offices, no formal agreement need be executed, but a written undertaking in Form GFR 32 suitably modified should be obtained from the loanee.

Rule 224.

Undertaking to be obtained from wholly-owned Government Companies: In the case of loans to wholly-owned Government Companies, a written undertaking to the effect that the fixed assets of the company shall not be hypothecated without prior approval of the Government should be obtained in Form GFR 32. No stamp duty need be paid on these written undertakings.

Rule 225.

- Loans to parties other than State Governments, wholly owned Government Companies and Local Administration of Union Territories shall be sanctioned only against adequate security. The security to be taken shall ordinarily be at least thirty-three and one-third per cent more than the amount of the loan. However, a competent authority may accept security of less value for adequate reasons to be recorded.

Rule 226.(1)

Submission of utilization certificate, reports, statements, etc.- In cases in which conditions are attached to the utilization of loan, either in the shape of the specification of the particular objects on or the time within which the money must be spent or otherwise, the authority competent to sanction the loan shall be primarily responsible for certifying to the Accounts Officer where necessary, the fulfilment of the conditions attaching to the loan, unless there is any special rule or order to the contrary. The loans sanctioned to the State Governments and the Local Administration of Union Territories shall not, however, come within the purview of this rule.

Rule 226.(2)

(i) The certificate referred to in Rule 226 (1) above should be furnished as in Form GFR 19- B and at such intervals as may be agreed to between the Audit Officer and/or the Accounts Officer, as the case may be, and the Ministry or Department concerned. Before recording the certificate, the certifying officer should take steps to satisfy himself that the conditions, on which the loan was sanctioned, have been or are being fulfilled. For this purpose, he may require the submission to him at suitable intervals of such reports, statements, etc., which will establish the utilization of loan for the purpose for which it was sanctioned. The loanee institution may also be required to furnish a certificate from its Auditors that the conditions attaching to the loan have been or are being fulfilled. The certificate should give details of the breaches, if any, of those conditions.

(ii) A certificate of utilization of the loan should be furnished to the Accounts Officer in every case of loan made for specific purposes, even if any conditions are not specifically attached to the grant. Such certificates are not, however, necessary in cases where loans are sanctioned not for any specific purpose or object but take the shape of a temporary financial aid or where the plan loans have been sanctioned to the Public Sector Undertakings intended for financing of their approved capital outlays. The repayment of loan, however, has to be watched in the usual manner.

(iii) In respect of loans the detailed accounts of which are maintained in the Audit Offices, the authorities sanctioning the loan should furnish the utilization certificate in respect of each individual case.

(iv) Where the detailed accounts of the loans are maintained by the departmental authorities, a consolidated utilization certificate should be furnished to Audit by the Ministries / Departments sanctioning the loans to Institutions / Organizations for the total amount of the loans disbursed during each year for different purposes including the loans sanctioned by their subordinate officers. This certificate will not cover the loans to individuals for which utilization certificates need not be furnished to the Accounts Officer. The certificate should indicate the year-wise and object wise break-up of loans disbursed and the loans for which utilizations certificates are furnished. The utilization certificate should also show the loans disbursed separately for each sub-head of account to facilitate verification by the Accounts Officer.

(v) The utilization certificates should be furnished within a reasonable time' after the loan is paid to the institutions. The Department of Central Government should prescribe, in consultation with the Finance Ministry, target dates for the submission of the utilization certificates by the Department concerned to the Accounts Officer. The target date should, as far as possible, be not later than eighteen months from the date of sanction of the loan.

(vi) In respect of loans, the detailed accounts of which are maintained by Departmental Officers and where consolidated utilization certificates are to be furnished to Accounts Officer, the period of 18 months should be reckoned from the expiry of the financial year in which the loans are disbursed. The consolidated utilization certificates in respect of such loans paid each year should, therefore, be furnished not later than September of the second succeeding financial year.

(vii) The due dates for submission of the Utilization Certificates should be specified in the letter of sanction for loan. The target date as specified should be rigidly enforced and extension should only be allowed in very exceptional circumstances in consultation with the Ministry of Finance under intimation to the Audit Officer and/or the Accounts Officer, as the case may be. No further loans should be sanctioned unless the sanctioning authorities are satisfied about the proper utilization of the earlier loan sanctioned to an Institution, etc.

(viii) In respect of loans sanctioned to departmental co-operative canteens in Government Offices, the Heads of Departments should furnish the utilization certificate.

Rule 227.

Instalments of Loans: When a loan of public money is taken out in instalments, each instalD1ent of the loan so drawn shall be treated as a separate loan for purposes of repayment of principal and payment of interest thereon except where the various instalments drawn during a financial year are, for this purpose, allowed to be consolidated into a single loan as at the end of that particular financial year. In the latter event, simple interest at the prescribed rate on the various loan instalments from the date of drawal of each instalment to the date of their consolidation shall be separately payable by the borrower. Repayment of each loan or the consolidated loan, as the case may be, and the payment of interest thereon shall be arranged by the borrower annually on or before the anniversary date of drawal or consolidation of the loan in such number of instalments as the sanctioning authority may prescribe. The sanctioning authority may allow, in deserving cases a moratorium towards repayment of principal but not for the payment of interest. Should it appear that there is an undue delay on the part of the debtor in taking out the last instalment of a loan the authority sanctioning the loan may at any time declare that loan closed, and order repayment of capital to begin. The Accounts Officer shall bring to notice any delay that appears to him to require this remedy and he shall take this step whether or not there are any dates fixed for taking of instalments.

NOTE 1: These instructions are applicable mutatis mutandis to loans, the repayments of which are made by other than annual instalments.

NOTE 2: It must be remembered that the calculation fixing the amount of equal periodical instalments, by which a loan is repaid with interest, presupposes punctual payment of the instalment and that, if any instalment is not punctually repaid, the interest amount will need to be recalculated.

Rule 228.(1)

Defaults in Payment: The loan sanctions in favour of State or Union Territory Governments and the loan sanctions or undertakings or agreements in case of wholly Government owned companies or Public Sector Undertakings should invariably include provision for the levy of penal interest on overdue instalments of interest or principal and interest. The loan sanctions and agreements in all other cases should invariably stipulate a higher rate of interest and provide for lower rate of interest in the case of punctual payments. The penal or the higher rate of interest, as the case may be, shall not, except under special orders of Government, be less than two and half percent. Per annum above the normal rate of interest prescribed by Government from time to time for the loans advanced.

Rule 228.(2)

Any default in the payment of interest upon a loan or in the repayment of principal, shall be promptly reported by the Accounts Officer, to the authority which sanctioned the loan. The responsibility of the Accounts Officer, under this rule refers only to the loans, the detailed accounts for which are kept by him.

Rule 228. (3)

Procedure to be followed in case of defaults in repayment of interest free loans or loans sanctioned at concessional rates of interest:

  • In the case of grant of interest free loans e.g., loans to technical educational institutions for construction of hostels, prompt repayment should be made a condition for the grant of interest-free loans. The sanction letter in such cases should provide that in the event of any default in repayment, interest at rates prescribed by Government from time to time will be chargeable on the loans.
  • In the Case of loans sanctioned at concessional rates of interest e.g., loans under the State Aid to Industries Act and Rules, the payment of subsidy (to cover the concession, viz., difference between the normal rate and concessional rate), should be made conditional upon prompt repayments of principal and payment of interest thereon by the party concerned.
  • In the cases where in addition to interest free loans, subsidy is also provided to meet running expenses e.g., loans to departmental canteens, the sanction letter should provide that in the event of any default in repayment, the defaulted dues would be recovered out of the subsidy payable.

Rule 228. (4)

On receipt of a report of default referred to in sub-rule (2) above, the authority concerned shall immediately take steps to get the default remedied and also consider enforcement of penal or higher rate of interest on the overdue amounts. Where the sanctioning authority is satisfied, having regard to the circumstances of the case, that penal or higher interest need not. be recovered, the borrower should ordinarily be asked to pay interest, at the norma1 rate prescribed in the loan sanction, on the overdue amount (of principal and/or interest) from the due date of payment up to the date of settlement of the default. The recovery of additional interest should not be waived except in special circumstances or where the period of defaults is very short, e.g., a few days.

Rule 229.

Irrecoverable Loans: A competent authority may remit or write off any loans owing to their recoverability or otherwise.

Rule 230. (1)

Accounts and Control.- Subject to such general or specific directions as may be given by the Comptroller and Auditor-General in this behalf, detailed accounts of loans to Institutions and Organizations, etc., shall be maintained by the Accounts Officer who shall watch their recovery and see that the conditions attached to each loan are fulfilled.

Rule 230.(2)

In the case of loans to private individuals, the detailed accounts of such loans shall be maintained by the departmental authorities concerned who shall also watch their recovery and see that the conditions attached to each loan are fulfilled. The detailed procedure to be followed for the various categories of loans to private individuals should be laid down in consultation with Finance Ministry and the Comptroller and Auditor-General of India.

Rule 231.

The instructions contained in this Chapter relating to cost of audit of grants-in-aid are applicable mutatis mutandis in the case of loans as well.

Rule 232.

Annual Returns: Each Principal Accounts Officer shall submit to the concerned Ministry or Department of Government a statement in Form GFR 20 showing the details of outstanding Central Loans borne on his books as on thirty-first March each year. This statement should be submitted not later than the following thirtieth September and should indicate the aggregate of outstanding balance of loans, details of defaults, if any, in repayment of principal and/or interest and the earliest period to which the default pertains, against each State or Union Territory Government, foreign Government, Railway or Department of Posts funds, public sector and private sector enterprises, Co-operative and other institutions, etc. Where, however, detailed accounts are not required to be maintained by the Accounts Office, the statement should contain departmental authority-wise aggregate balances of outstanding loans.

Rule 233.

Review of annual statements with a view to enforce repayments of the principal and interest due.- The Administrative Ministries should keep watch over the receipt of the annual statements in Form GFR 20 regularly from the Accounts Officer and conduct a close review of the cases of defaults in repayment of the instalments of principal and/or interest due, as revealed from these annual statements and take suitable measures for enforcing repayments of the principal and interest due. If these statements are not received in time, the Accounts Officer should be reminded promptly. To facilitate a proper review of the position of outstanding loans, the Ministries may also arrange to maintain centrally a list of all sanctions issued relating to loans advanced to State Governments and other parties.