CHAPTER 10

LOANS, ADVANCES, GRANTS-IN-AID, GUARANTEES AND INVESTMENTS

10.1 GENERAL

10.1.1 Sanctions are issued by Ministries/Departments relating to loans and grants-in-aid in accordance with the guidelines provided in Chapter 11 of the General Financial Rules, and advances to Government servants in accordance with Chapter 14 thereof. Some loans and advances are sanctioned by Government under special laws, others for special reasons or as a matter of recognised policy.

10.1.2 General guidelines and instructions in regard to the interest rates to be charged, period of repayment to be fixed for loans to different parties, and for various purposes in respect of public sector projects in particular, etc. are contained in Ministry of Finance (Budget Division) O.M. No. F.14 (17)-B(SE)/ 79 dated 28-6-1980 as amended from time to time. (Annexure 'A' to this Chapter). These may be kept in view by Accounts Offices while scrutinising the sanctions for loans. In the case of loans the detailed accounts of which are required to be maintained by the Pay and Accounts Office, that office should see that the conditions of repayment thereof are complied with by the loanee and should exercise a close watch over repayment of principal, and realisation of interest. In the case of loans to public sector undertakings, statutory bodies, institutions etc. (other than State/U.T. Govts.) the Accounts Officer maintaining the detailed account shall issue notices a month in advance of the due date of repayment vide Note 4 below Government of India decision 1 below GFR 155. Any default in payment, either of principal or of interest by all loanees should be reported without delay to the authority which had sanctioned the loan or the advance. If that authority enforces any penal interest upon the overdue instalment of interest, or principal and interest it shall be the duty of the Pay and Accounts Office to watch its recovery.

10.2 CLASSIFICATION

10.2.1 Loans to State Governments are debitable to the major head "760-Loans to State Governments" and are treated as 'charged' items of expenditure. Other loans (but not advances to Government servants) are debitable to any of the heads from "677-Loans for Education, Art and Culture to 765-Advances to Foreign Governments", and also "767-Miscellaneous Loans" as is found suitable for the purpose. Advances to Government servants are debitable to the major head "766-Loans to Government servants."

10.3 PROCEDURE FOR PAYMENT OF LOANS AND ADVANCES SANCTIONED BY CENTRAL GOVERNMENT

10.3.1 Paras 8.20.1 to 8.20.8, 8.23 and 8.24 of Chapter 8 deal with the detailed procedure to be followed for payment of loans and grants-in-aid to State Governments and Union Territory Governments and Administrations.

10.3.2 Payment of loans and advances to parties other than State/U.T. Governments and Administrations shall be made by the drawing officers of the Ministries/Departments sanctioning payment of loans and advances. The drawing officer shall present to the Pay and Accounts Office concerned a bill on a simple receipt in a form similar to form T.R. 42 duly supported by a copy of the sanction for such payment. He shall also record on the bill, after due verification, a certificate to the effect that the conditions specified in the sanction have been satisfied and/or that a formal undertaking/agreement has been obtained from the loanee concerned. The Pay and Accounts Office will forward to the drawing officer a crossed cheque drawn in favour of the party concerned, and the DDO will deliver it to the loanee and obtain his acquittance (duly stamped wherever necessary) and pass it on to the P.A.O

[Authority:—Para 1 of Ministry of Finance (DEA) O.M. No. F.10(41)—B/64 dated 12-5-1970]

10.4 PROCEDURE FOR REPAYMENT OF THE LOANS AND ADVANCES AND INTEREST THEREON 1

10.4.1 Paras 8.20.2, 8.20.8 and 8.23.3 of Chapter 8 deal with the procedure to be followed for repayment of loans and payment of interest by State Governments and U.T. Governments.

10.4.2 The procedure indicated below shall be followed for the repayment of principal and/or interest payment on the loans and advances referred to in para 10.3.2 by the borrowers e.g. Public Sector Units, Statutory bodies, institutions, Societies, Private Sector concerns and individuals:—

(a) payment of interest and/or principal shall be tendered on or before the due date, at the specified New Delhi main branch office of the public sector bank accredited to the Ministry/Department which sanctioned the loan or its successor on whose books the accounts of the loans in question are maintained.

(b) the payment will be made in cash or by cheque/draft drawn on a scheduled bank in Delhi/New Delhi in favour of the public sector bank branch (mentioned in sub-para (a) above). The payment will be accompanied by a memorandum or challan in duplicate, giving the following details:—

(i) name of the loan sanctioning Ministry/Department (or its successor as the case may be;

(ii) number and date of the sanction letter with the loan amount sanctioned;

(iii) amount due for payment, separately for interest and principal and the head(s) of account to which the dues are to be credited in the Government account. Separate cheques/drafts and challans should be submitted for payment of principal and interest; and

(iv) due date of payment.

Note: In order that Government may get relevant credit by the due date cheque/draft should be so tendered at the bank as to give enough time for its clearance on or before the due date by the bank.

[Refer Correction Slip 35]

(c) outstation loanees may arrange to tender payment of dues together with memorandum/challan in duplicate through their bank to the public sector bank branch at New Delhi mentioned in (a) above ensuring that payment is tendered at the aforesaid public sector bank branch by the due date; and

(d) the receipt of cheque/draft tendered in payment of dues will be acknowledged by the public sector bank through a paper token immediately and after realisation of the cheque/draft, duplicate copy of the challan will be given to the tenderer.

The public sector bank collecting the dues shall arrange prompt credit thereof to Central Government account and send original copy of the challan with a credit scroll to the Pay and Accounts Officer of the Ministry/Department in accordance with the general instructions issued for handling receipts and payments of the Ministry/Department.

[Authority: Ministry of Finance, Department of Economic Affairs, O.M. Na F. 10(7)-B(TR)/76 dated the 21st June, 1976].

10.4.3 The repayment of loan shall be watched in accordance with the terms of the sanction read with Government of India decision No. 1 below GFR 156. Normally, the repayment of a loan shall commence from the 1st anniversary date of its drawal in the specified number of annual equal instalments of principal. While a suitable period of moratorium towards repayment of principal might be permitted/sanctioned by Govt., no moratorium shall be allowed in respect of payment of interest.

10.4.4 Interest shall be recovered from the loanees at the rates prescribed by Government from time to time and calculated in accordance with the principle laid down in Rule 156 of GFRs. Instructions issued by the Ministry of Finance (Budget Division) from time to time prescribing the rates of interest to be charged from statutory bodies, corporations etc. may also be referred to for this purpose in cases of doubt.

10.4.5 When the due date of repayment of any instalment of principal or interest on a loan advanced to a State Government/any other party, falls due on a Sunday or other holiday, no interest need be charged for the day or days for which the recovery gets postponed on this account. However, if the principal or interest is repayable on the 31st March of a year and if that day happens to be a holiday the recovery should be made on the immediate preceding working day.

[Authority: Govt. of India, Ministry of Finance, O.M. No. 13(10)/W&M/62 dated 23-7-1963]

10.5 LOAN REGISTERS AND BROADSHEETS

10.5.1 The sanction orders for payment of loans should be generally scrutinised and details of the amount sanctioned, the authority sanctioning the loan and the conditions of each loan should be noted in a Loan Register (Form CAM 29) in the page assigned to it under the attestation of the Accounts Officer. Separate pages should be allotted for each loan, and repayments and receipt of interest amounts should be noted/watched against each loan (or instalments of drawal thereof, wherever a loan is not drawn in one lump sum). It should be seen that a specific provision for levying penal interest in the event of default in the repayment of principal and|or payment of interest thereon on the due dates exists in all sanctions in accordance with Rule 161(2) of GFRs.

10.5.2 A Broadsheet (Form CAM 59) shall be maintained major and minor head-wise (separately for debits and credits) to reconcile the payments and recoveries of the loans arising during each month, with the accounts figures.

10.6 UTILISATION CERTIFICATES

10.6.1 Receipt of a utilisation certificate from the loan sanctioning authority shall be watched in all cases of payment of loans for specific purposes or in cases where conditions like specification of the particular object on or the time within which the loan must be spent are stipulated in the sanction order for the payment of loan. Utilisation certificates are not required to be submitted in cases of (a) where the loans are sanctioned for giving temporary financial aid to public undertakings etc. to tide over a temporary financial crisis; (b) the loans are intended for financing of their approved capital outlay and (c) of loans given to State Governments and Union Territory Governments.

[Authority: Ministry of Finance, Department of Expenditure O.M. No. F-14(5)-E. II(A)/77 dated 30.5.1979].

10.6.2—Para 5.14.2(iv) may be referred to in connection with retrospective conversion of a loan given to a State or Union Territory Government into a grant-in-aid.

[Refer Correction Slip 59]

10.7 LONG TERM ADVANCES TO GOVERNMENT SERVANTS

10.7.1 Long term interest-bearing advances to Government servants, namely, House Building Advance, Motor Car, Motor Conveyance advance which are recoverable in not less than 60 instalments shall be paid only after pre-check of the bills by the concerned Pay and Accounts Office. The PAO shall keep a note of such payments in a Register (Form CAM 30) prescribed for the purpose and note therein the repayment thereof. The payments and recoveries noted in this register shall be reconciled monthly with the figures compiled in the monthly accounts, and discrepancies, if any, shall be rectified. For calculation of interest, Para 4.29.2 may be referred to.

[Refer Correction Slip 10]

10.7.2 In the case of Central Government employees transferred from one Ministry/Department to another under the Government of India, including on deputation basis, the balances outstanding against the Government servant at the time of such transfer shall be transferred to the Accounts Officer of the deputation department for watching the recoveries. Such transfers shall be effected as plus and minus credits in the books of the transferring and receiving Accounts Officers respectively, so as not to mix these up with the figures of actual expenditure/ payment under these heads for the year vis-a-vis the budget allotment made to various departments for the purpose. At the time of such transfer of balances, the number and date of the sanction order, date of payment of the advance (s), amount, details of month-wise recoveries so far effected, balance outstanding shall also be intimated by the transferring Accounts Officer.

10.7.3 Provisions of the All India Services (House Building Advances) Rules 1978 (notified in D.P.A.R.'s No. 29012/1/75-AIS(II) dated 31-5-1978 are applicable to All India Service Officers. In the case of an All India Service Officer borne on State cadre but on deputation with the Central Government, autonomous bodies, public sector undertakings etc. owned or controlled by the Central Government application for house building advance at the rates and subject to the conditions as per the House Building Advance Rules of the Government of India shall by processed and advance sanctioned by the State Government concerned on whose cadre he is borne. The advance shall be drawn by the drawing and disbursing officer of the department of parent Government which had issued the sanction and payment will be made by that DDO to the officer concerned by bank draft through the DDO of the office in which the officer is presently working under the Central Government. The recoveries (credits) from pay bills will be passed on by the Central Pay and Accounts Office concerned to the Accountant General of the State concerned on cash settlement basis in the usual manner.

A similar procedure will also be followed for the drawal and payment of other types of advances, if any, sanctioned by State Government to its officers on deputation with the Central Government Departments. For drawal of temporary advances and part final withdrawal from the G.P. Fund, please see Note below Para 6.4.2 as inserted by correction slip No. 48.In regard to sanction and payment of conveyance advance, please see Rule 191 and explanation there under of General Financial Rules.

[Authority: D.P.A.R. letter No. 14018/3/80-AIS(II) dated 4-5-1981 read with Min. of Fin. (Deptt. of Exp.) Spl. Cell O.M. No. F-4(9)/76SC dated 11.3.1977]

[Refer Correction Slip 49], [Refer Correction Slip 108]

10.8 SHORT-TERM ADVANCES TO GOVERNMENT SERVANTS

10.8.1 Under the provisions of para 187 of General Financial Rules, heads of offices are responsible for the recovery of the advances granted in accordance with the provisions of the rules contained in Chapter 14 ibid alongwith interest, if any, recoverable and to ensure that the conditions attached to each advance are fulfilled. The head of office shall also maintain detailed account of short-term advances granted to Government servants which would include not only advances granted to Govt. servants which are recoverable in less than 60 instalments but also recovery of advance of pay/TA on transfer, tour advance and advance for Leave Travel Concession etc. Derailed procedure to be followed for the maintenance of records relating to short term advances by heads of offices, and submission of periodical returns to Pay and Accounts Offices have been spelt out in Chapter 14 to General Financial Rules and Annexure "A" thereof.

10.8.2 Pay and Accounts Office should watch for the receipt of the monthly abstracts each month from every drawing and disbursing officer and check them in regard to the certificates and for arithmetical accuracy, tally the opening balance with the closing balance shown in the abstract of the previous month, check all accretions with the relevant vouchers relating to advance paid and recoveries effected through the establishment pay bills for the month respectively. The Bill Passing cum Expenditure Control Register shall be used effectively to conduct reconciliation of accounts figures with departmental figures for all units of Appropriation including those relating to the three minor heads "Advances for Purchase of oilier Conveyances", "Festival Advance", and "Other Advances" with reference to entries in the monthly abstracts and discrepancies, if any detected, should be pointed out to the drawing and disbursing officer concerned for rectification.

There is a distinct minor head with the nomenclature "Festival Advance" under the major ' head "766-Loans to Government Servants etc.". Of all loans and advances to Government servants, the maximum budget provision is made under the minor head "Festival Advances". No interest is also recoverable in respect of this type of advance. Also, generally, all employees drawing the advance repay it in the maximum permissible instalments (viz. 10 at present). Therefore, Pay & Accounts offices could easily carry out a cross check (so long as the rate and number of instalments for repayment or not varied) based on data available with them as to whether total of recoveries effected on this account during any month by a D.D.O. is to the extent actually required to be effected etc, so as to facilitate conduct of further probe in cases of large variations etc. Distortions, if any, could be only on account of (i) non-recovery from persons on extraordinary leave during the month or double instalment recovery from persons returning from such leave; or (ii) due to cases of 'transfers in' and 'transfers) out' of persons (who have the advance outstanding), from or to another Central Government Department on deputation/reversion from deputation, which would also be rare. Cross check as follows could be exercised either in respect of individual D.D.Os or for all D.D.Os together:—

The total recovery effected (by a D.D.O. or group of D.D.Os) during any one month should be-1/l0th of the total advance drawn and paid (by the same D.D.O. or same group of D.D.Os). during the preceding ten months.

A similar cross-check can be effected by a Principal Accounts Office for all the D.D.Os put together, provided that the transactions of no D.D.O. were left out of the compilation for the period.

[Refer Correction Slip 33]

10.8.3 Payment of such advances need not be noted in the objection book or other records/registers by the P.A.O to watch recovery from individuals vide Note below para 10.8.7 infra.

10.8.4 During the course of internal inspection of the office of drawing and disbursing officers concerned, internal check parties shall, however, verify by referring to the vouchers etc. through which the advances were drawn that payment entries arc made properly in the Pay Bill Register and that recoveries are being effected regularly from the Government servant concerned and check the correctness of the entries in the monthly abstracts of recoveries, especially entries relating to ' transfers in' and ' transfers out' cases.

10.8.5 Differences are likely to arise between accounts figures of balance in the books of a P.A.O under the respective minor heads and balances held by his DDOs in their books and reported through the monthly abstracts on account of persons who have balances outstanding against them getting transferred away or coming on transfer from/to the DDO's offices and these would be accounted for against entries under columns 3 & 5 of the monthly abstracts. But such differences under the accounting circle of a Pr. A.O would normally be small due to compensating effect as it is observed that Group C & D staff who are entitled to short-term advances are transferred mostly between DDOs (branches of one and the same Civil Ministry|Deptt. whose accounts are managed by Pay and Accounts Offices functioning under a single Principal Accounts Office. Instances of transfer of such staff between DDOs linked with Pay and Accounts Offices functioning under different Pr. A.Os are very rare and arise probably only if and when CSSS, CSCS etc. staff working in the Secretariat are transferred among different Ministries/Deptts. Therefore, the present system of DDOs indicating in the L.P.Cs the outstanding balance of such advances for necessary recoveries by their counterparts in Civil Ministries|Deptts. without effecting inter-Departmental adjustments among themselves to pass on credits would be continued.

10.8.6 ln order to rectify the slight variations that may have arisen on account of the transfers 'in' and 'out' cases between balances indicated by DDOs as recoverable in the monthly abstracts and the accounts figures held in the books of P.A.Os/Pr. A.Os, it would be necessary to introduce the concept of 'raising up' or 'lowering down' of the account balances held in the books of Pay and Accounts Offices and Pr.A.Os so as to bring them on par with the ground balances with the DDOs. For this purpose, after the close of the accounts every year, each PAO should send to his Pr.A.O. by the date to be prescribed by the latter (a) a report indicating therein the figure as per his account (Book Section) as on the last day of the financial year, (say 31-3-1982 to start with) under the three minor heads referred to above and total of the ground balances (i.e. closing balance indicated in the abstracts for February, 1982 plus payments minus repayments in cash during March, 1982) held by all DDOs put together as on that date (b) a certificate that the monthly abstracts for and upto February, 1982 have been checked through the process of having verified the successive monthly abstracts for all the preceding months of the year as prescribed in para 10.8.2 above and (c) recommendation in regard to the extent of 'proforma' correction needed. Each Pr.A.O will similarly send the report and recommendation in respect of his entire accounting circle to the Controller General of Accounts while submitting material for Statement No. 17 of the Finance Accounts.

10.8.7 CGA's Office would, thereafter, compare the total of the accounts figures separately under the three heads held by all Pr. Accounts Offices with the total of the ground balances indicated by them as held by the DDOs under them and after satisfying that the totals agree, the CGA worid accord sanction for each Pr.A.O to raise/lower the figures, as the case may be, to come to the level of total of the figures of ground balances held by DDOs within the circle as 'proforma' correction. The figures appearing against these three minor heads in the Finance Accounts for Union Government as a whole prepared by the C.G.A would not be affected but it would only enable individual Pr.A.Os/P.A.Os to up-date their accounts figures.

NOTE:—As the DDO/head of office is responsible for watching prompt recovery/ adjustment of all types of short-term advances, the PAO need not note payment of advances on tour, transfer etc. in the Objection Book.

10.9 GRANTS-IN-AID

10.9.1 Grants-in-aid can be given only to a person or a body which is independent of the Government. One department of the Government cannot make a grants-in-aid to another department of the same Government. An organisation set up by a Government resolution or by an executive order does not have separate legal status of its own and functions only as a limb of the Government. Therefore, Government cannot give grant to such an organisation.

10.9.2 Instructions regarding conditions etc. for the sanction of grants-in-aid to public bodies, institutions etc. are contained in rules 148 to 151 of the General Financial Rules. These should be kept in mind at the time of checking the sanctions for payment of grants-in-aid. The provisions of para 4.27 of Chapter 4 of this Manual may be kept in view for scrutinising the sanctions and for maintaining the relevant register(s).

10.9.3 Grants to local bodies, institutions etc. can be divided into two categories, namely,

(a) Grants for general purposes; and

(b) Grants for specified purposes.

No conditions are attached to grants for general purposes and the lumpsums as sanctioned by Government are paid to local bodies. In such cases the Pay and Accounts Office is not concerned with the manner in which the grant is utilised by the grantee. Accordingly, no utilisation certificate is to be called for in such cases. Grants for specified purposes should state clearly the object for which they are given and the period within which they should be expended. Normally, grants made by a sanctioning authority are required to be utilised within one year after the date of issue of the sanction. Hence utilisation certificate should ordinarily be due after a period of roughly 1½ years from the date of sanction of the grant. A formal utilisation certificate about the proper utilisation of the grant from the administrative/technical and financial point of view should be arranged to be furnished by the administrative authority to the Pay and Accounts Office. Normally, the certificate should be based on debtors' statement of accounts and the reports regarding performance or achievements of the grantee institutions vis-a-vis the objects and conditions of the grants.

10.9.4 In respect of grants given by Central Government to State Governments, the following procedure is to be followed in regard to submission of utilisation certificates:—

(a) Utilisation certificates need not be furnished by the Ministries/ Departments of the Central Government, where the expenditure out of the central grants is incurred by the State Governments direct.

(b) Where such expenditure is incurred by the State Governments through local bodies or private institutions, utilisation certificates should be furnished by the State Governments concerned.

10.9.5 In respect of grants to non-government or quasi-government bodies or institutions, the Central Government have decided that where assets are to be acquired wholly or substantially out of Government grants, it should be laid down that assets should not, without the prior sanction of Government, be disposed of or utilised for purposes other than those for which the grants were sanctioned. The Pay and Accounts Offices have, therefore, to watch compliance with such conditions.

10.9.6 The Register (Form CAM 28) prescribed as 'Register of Grants-in-aid' may be utilised for entering payments relating to scholarships and for watching/ noting receipt of utilisation certificates wherever necessary.

10.9.7—Para 5.14. 2(iv) may be referred to in connection with retrospective conversion of a grant-in-aid given to a State or Union Territory Government into a loan.

[Refer Correction Slip 60]

10.10 GUARANTEES GIVEN BY CENTRAL GOVERNMENT

10.10.1 Article 292 of the Constitution empowers the Union Government to give guarantees in respect of loans raised by others within such limits as may be fixed from time to time by an Act of Parliament. Such guarantees constitute contingent liability of the Government.

10.10.2 All cases of guarantees outstanding at the end of a calendar year are required to be reported to Budget Division by Financial Adviser of the concerned Ministry/Department. All Payments made in pursuance of the guarantee should also be reported. For this purpose, a proforma has been prescribed in the O.M. No. F. 12(1)—B(SE)/84 dated 28-1-1984 issued by the Ministry of Finance (Deptt. of Economic Affairs, Budget Division). According to the said O.M., the report is required to reach Budget Division by the 2nd Week of January each year for incorporating in the Explanatory Memorandum on the Budget".

[Refer Correction Slip 139]

10.10.3 When guarantees are invoked, the expenditure involved should be treated as loan to the persons/parties on whose behalf the guarantees were given and recoveries thereagainst should be watched. Both the expenditure and recoveries, if any, should be classified in the Government account under a distinct sub-head "Loans on invoking guarantees given by Government" under the relevant loan major heads exhibiting the name of the loanee as a detailed head. If in due course, the whole or a part of the loan amount is finally held to be irrecoverable, the same should be adjusted in the manner indicated below:—

(a) Where a guarantee Reserve Fund already exists, the amount of loan held to be irrecoverable should be adjusted by debit to the Fund by following the accounting procedure prescribed for accountal of expenditure financed from Reserve Funds, vide para 3.4 of the General Directions contained in the List of Major and Minor Heads of Account.

(b) Where a guarantee Reserve Fund does not exist, the amount of loan held to be irrecoverable should be adjusted under the minor head "Irrecoverable loans written off" under the major/sub-major head relevant to the purpose/function for which the loans etc. had been granted. Where, however, the loan cannot be identified with any purpose/function, the amount should be adjusted under the aforesaid minor head under the major head "268—Miscellaneous General Services", vide para 3.3 of the General Directions contained in the List of Major and Minor Heads of Account.

(Authority: Ministry of Finance (DEA) O.M. No. F.1(34)-B(AC)/ 76 dated the 8th August, 1979.)

10.10.4 Data in regard to issue of guarantees would not be susceptible of check by the Accounts Office. The information relating to the guarantees outstanding at the end of a financial year required for statement No. 5 of the Finance Accounts of the Union Government shall be called for from the Finance Wing of each Ministry/Department, (which shall be responsible for its correctness) so as to reach the concerned Chief Controller/Controller of Accounts duly confirmed by the 21st April of each year. The latter in turn would arrange to furnish the same to the Finance Accounts Section of the Office of the Controller General of Accounts latest by 3lst May each year. Each return sent by the Chief Controllers/Controllers of Accounts will also show the guarantees, if any, invoked during the year. As all payments arising as a result of guarantees being invoked are to be treated as loans, the figures of amounts paid included in the Statement should be based on the accounts figures booked by Pay and Accounts Officer concerned.

[Refer Correction Slip 173]

10.11 INVESTMENTS

10.11.1 Investments are made by Government mostly in public sector undertakings or statutory corporations. In addition to the scrutiny of the sanctions for payment on the lines specified for check of sanctions for payment of loans, and making payment of bills, the Pay and Accounts Office shall, also ascertain that Government has actually received shares against the investment(s) made by Government in the concerned company. A record of investments made by Union Government in statutory corporations, public sector companies, other joint stock companies, cooperative banks and societies etc. shall be kept in a "Register of Investments" (Form CAM-60). This register shall be maintained by the Principal Accounts Office or by the Pay and Accounts Office responsible for release of funds for investments and receipt of dividend shall also be watched through this register.

10.11.2 For maintaining the register, the following information would also be obtained from the Ministry/Department concerned.

(a) Whether share scrips for full value invested have been issued by the company etc. concerned to the Government in the name of the President of India.

(b) Name and designation of the officer responsible for the safe custody of share scrips.

(c) Whether the share scrips are in the custody of the officer or kept in the public sector bank with which the Ministry/Department is in account or have been kept in stock with the Reserve Bank of India (Public Debt Office).

(d) Whether the physical existence of periodically the share scrips is verified

(e) Details of the dividend declared by the companies.

(f) Full particulars regarding realisation of dividend from the company and their credit to Government account and also verification of the actual credit of the amount in Government account.

10.12 PERMANENT ADVANCES

10.12.1 Permanent advance is normally granted to officers who have to make payments before they can place themselves in funds by drawing money from the Pay and Accounts Office subject to the provisions of Rule 90 of GFRs.

10.12.2 A note of each item of permanent advance given to various authorities shall be kept in the "Register of Permanent Advances" (Form CAM-61). If the amount of an advance is increased or reduced during the course of a year, the amount in the column for the current year should be altered in red ink as soon as payment of the increased advance is made or credit representing difference due to reduction is received from the officer concerned. The amount of the advance outstanding as on 31st of March each year should be entered in the money column for the subsequent year.

10.12.3 Sanctions for permanent advance accorded by heads of departments are to be scrutinised to see:

(i) that the officer sanctioning the advance is a recognised head of department;

(ii) that the advance is intended not for his own office but for his subordinate office;

(iii) that the advance has been sanctioned keeping in view the provisions of GFR 90.

10.12.4 Acknowledgements from the officers holding permanent advances shall be obtained as on 31st March in the month of April, and the aggregate of the outstandings should be worked out from the register of permanent advances and tallied with the ledger balance.

 

ANNEXURE 'A' TO CHAPTER 10 

(Referred to in Para 10.1.2)

MOST IMMEDIATE

No. F. 14(17)-B(SE)/79 
Government of India 
Ministry of Finance 
Department of Economic Affairs 
New Delhi, the 28th June, 1980 

OFFICE MEMORANDUM

Subject:—Loans and advances by the Central Government—Interest rates and other terms and conditions.

Reference this Ministry's Office Memorandum No. F.14(17)-B(SE)/79 dated the 27th March, 1980, on the subject mentioned above.

A. INTEREST RATES

1.1 The Central Government's lending rates for State and Union Territory Governments, public sector enterprises and other parties have been reviewed. It has been decided that the rates indicated in paragraph 3 below will be applicable to loans to be sanctioned from 1st July, 1980 and these will remain m force until 30th June, 1981, unless revised earlier.

........ Paras 2, 3 and 4 not printed......

B. OTHER TERMS AND CONDITIONS

The instructions issued from time to time have been updated in the following paragraphs for facility of reference.

5. REPAYMENT PERIOD

5.1 The period for the repayment of loans should be fixed with due regard to the purpose for which they are advanced and it should be restricted to the minimum possible. Normally, no loan should be granted for a period exceeding 15 years. Where a longer period for repayment is sought, prior concurrence of the Budget Division in this Department will be necessary for fixing the period unless already obtained for a particular category of loans or the period has been prescribed by instructions issued by this Ministry earlier. In no case, however, the period of the loan should exceed 30 years.

5.2 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 utilised. However, no moratorium should ordinarily be allowed in respect of interest payment on loans.

5.3 The repayment of a loan should normally commence from the first anniversary date of its drawal or on expiry of the period of moratorium, as the case may be. The recovery should ordinarily be effected in annual equal instalments of principal.

5.4 In the case of loans to State Governments, sanctioned on or after 1st April, 1980, the arrangements for payment of annual instalment of principal and interest will be as under:—

(i) Block loans for State Plan Schemes and other Plan loans (including loans for Centrally Sponsored Schemes) but excluding loans for relending to industrial and commercial undertakings and individuals:—These loans when drawn in instalments, will be consolidated and deemed to have been drawn as on 1st October in each year. The period of these loans will continue to be 15 years, repayments being made in 15 annual equal instalments together with interest on the outstanding balance commencing from the following year. The amounts annually payable (by way of principal and interest) would be recovered in the four equal instalments on 1st July, October, January, and March each year.

(ii) Small Savings Loans:—The loans advanced during the year will be consolidated as on 1st October each year. The period of the loans will be 25 years including an initial moratorium of five years towards repayment of principal during which interest will be recovered in four equal instalments on 1st July, October, January and March each year. On expiry of the period of moratorium, the loans will be recovered in 20 annual equal instalments, the amount annually payable (by way of principal and interest) being recovered in four equal instalments on the 1st of July, October, January, and March each. year.

(iii) In the case of loans to State Governments, of which terms of repayment include consolidation as on 1st of October each year (viz. Block loans for State Plan Schemes and other Plan loans as also loans out of small savings collections), consolidation will be done separately for (A) Loans advanced during the month of April and May, 1986 carrying rates of interest applicable upto 31st May, 1986 and (B) loans drawn from 1st June. 1986 onwards at revised rates of interest. But for this there will be no change in the manner of calculation of interest and its recovery on recovery of principal.

(iv) Other Loans:—The terms of repayment of these loans will be as laid down from time to time.

[Refer Correction Slip158]

5.5 In the case of public sector projects:

(a) for new installations or expansion of existing institutions:

(i) The terms and conditions of loans should be fixed with reference to financial picture presented in the approved project report. (Once the pattern is settled, there should be no change except with the specific concurrence of this Department for reasons to be stated writing).

(ii) The capital requirements of a project should include adequate provisions for interest payment on borrowings during the period of construction (as specified in the Project Report). The interest on loans due during the period of construction will be allowed to be capitalised to the extent of the provisions made for this purpose in the approved project report. In other words, while interest on loans advanced to an undertaking during the period of construction will be notionally recovered by allowing its capitalisation, the payment of interest should effectively commence after the construction period is over.

(iii) The repayment of principal should ordinarily commence one year after the project commences production, the number of instalments being determined with reference to the financial projections and repaying capacity specified in the project report. Requests for further moratorium will be considered only in exceptional cases where the project report has specified any special circumstances that may necessitate a longer period of moratorium and has indicated clearly what staggering of repayment would be needed over the necessary break period. The period of loans sanctioned against capitalised interest during the period of construction may also be on the same terms and conditions as are applicable to loans provided for financing the project costs.

(b) In other cases: A suitable period of moratorium subject to a maximum of five years from the date of drawal of the loans may be allowed for the repayment of instalments of principal, having regard to the nature of the project, the stage of construction etc. The period of moratorium should not, however, extend in any case, beyond two years from the date of project going into production, or in the case of programmes of expansion, beyond two years from the date of expanded project coming into operation.

(c) For meeting working capital requirements: (i) The undertakings are expected to obtain their cash credit requirements from the State Bank of India/Nationalised Banks by hypothecating their current assets (such as, stock of stores, raw materials, finished goods, work in progress, etc.) and where the entire working capital requirements cannot be raised in this manner by seeking a guarantee from Government. Accordingly, request from public sector undertakings for funds for meeting working capital requirements should be considered only to the extent the same cannot be had from the State Bank of India/Nationalised Banks.

(ii) The period of repayment of working capital loans should preferably be restricted to two or three years. In no case, however, the period of these loans should exceed 5 years.

6. REPAYMENT BEFORE DUE DATE

6.1 Any instalment paid before its due date may be taken entirely towards the principal provided it is accompanied by payment towards interest due upto date of actual payment of instalment; if not, the amount of the instalment will first be adjusted towards the interest due for the preceding and current periods and the balance, if any, will alone be applied towards the principal. Where, the payment of the instalment is in advance of the date by 14 days or less, interest for the full period (half year or full year as the case may be) will be payable.

7. PENALTY CLAUSE

7.1 In terms of Rule 161(1) of the General Financial Rules (GFRs), the loan sanctions/agreements should invariably include a penalty clause providing for levy of a higher rate of interest in the event of default in repayment of instalment (s) of principal and/or interest. The higher/penal rate of interest should not be less than 2.75 per cent above the normal rote of interest at which a loan is sanctioned.

[Refer Correction Slip158]

7.2 It should be clearly understood that the disallowance of rebate of quarter per cent in interest rate; mentioned in para 3.4 above, in the event of delay in payments, would not be a sufficient penalty for the default.

7.3 The interest rates should be appropriately indicated in the Annexure to the loan sanctions (see paragraph 11 below). In the loan agreements with private parties (co-operative societies, statutory bodies other than public sector enterprises, private concerns, individuals etc.) the interest clause should be included as illustrated below; the illustration refers to a loan carrying normal rate of interest at 10½ per cent per annum.

Illustration "The loan will carry interest at 13 per cent per annum payable annually. Provided, however, that in the event of prompt payment of instalment(s) of principal and/or interest by the due dates, the rate of interest in relation to the said instalment(s) will be reduced to 10¼ per cent per annum".

8. DEFAULTS IN REPAYMENT/INTEREST PAYMENT

8.1 In the event of a default, the recovery of interest at penal rate may not be waived unless there are special reasons justifying a waiver; a decision in this regard should be taken at an adequate level on the advice of the Financial Adviser.Even in such cases a minimum of 1/4 per cent should be recovered from the defaulting party as penalty.

[Refer Correction Slip158]

8.2 Where administrative Ministry/Department is satisfied, having regard to the circumstances of a case that penal interest need not be recovered, the borrower should invariably be asked, in accordance with the provisions of GFR 161(3), to pay interest at the normal rate prescribed in the loan sanction on the overdue amount (of principal and /or interest) from the due date of payment upto the date of the settlement of the default. The recovery of additional interest should not be waived except where the period of default is very short e.g. a few days. However, such a waiver would not entitle the borrower to rebate on delayed payments.

8.3 It should be noted that in the case of public sector enterprises, the penal rate of interest is chargeable on the overdue instalments of principal and/or interest from the due date of their payment to the date preceding the date of actual payment. In other cases covered by the illustration in paragraph 7.3, however, interest at higher rate is to be calculated on:

(i) outstanding balance of the loan from the date of payment by the borrower of the instalment previous to the defaulted one till the due date of payment, plus

(ii) compound interest on the instalment of principal, if any, in default and the interest worked out as per (i) above to be calculated from the due date of payment till the date preceding the date of actual payment.

8.4 Whenever a fresh loan is to be sanctioned to a borrower who has earlier defaulted, the loan sanctioning authority must consider the question of recovery of defaulted dues. Where, for any special reasons, recovery of defaulted dues is not proposed to be enforced, the reasons must be recorded in writing and, in important cases, the Financial Adviser should bring them to the notice of Secretary (Expenditure), Ministry of Finance, before sanctioning any fresh loan.

9. REQUESTS FOR MODIFICATION OF TERMS OF LOANS

9.1 Under GFR 155(2) borrowers are required to adhere strictly to the terms settled for loans made to them and modifications of these terms in their favour can be made subsequently only for very special reasons. Requests for modification of terms may relate to increase in the period of a loan or of an initial moratorium period towards repayment, or waiver of penal interest or reduction in or waiver of normal rate of interest. The procedure of dealing with request for waiver of penal interest has already been dealt with in paragraph 8. Cases involving other modifications in repayment terms should be considered in consultation with the Budget Division in this Ministry. In referring such cases the impact of the modifications on the estimates of repayment/interest which have gone into the Budget and Government's resources position should be succinctly brought out by the administrative Ministry.

9.2 In examining proposals for modification of the period of the loan, the interest rate at which the loan was sanctioned should also be reviewed as in case the period is extended, the interest rate would correspond to the longer term as if the loan had been sanctioned for the extended period ab initio.

In the case of a loan of which repayment has already commenced the revised rate of interest should be applied ab initio only to residuary portion of the loan outstanding on the date of extension of its period.

9.3 Requests for waiver of recovery of normal interest (either for a specified period or for the entire period) on a loan which was originally sanctioned at normal rate of interest, will attract the provisions of Government of India's decision (2) below G.F.R. 156(2) and should be dealt with accordingly. 

10. LOANS SANCTIONED AT CONCESSIONAL RATES

10.1 In cases where loans are to be sanctioned at a concessional rate, the instructions contained in Government of India decision (2) below GFR 156 (2) have to be observed. In such cases, payment of subsidy (to cover toe concession viz. difference between normal rate and concessional rate) should be made conditional upon prompt repayment of principal and payment of interest thereon by the borrower.

10.2 In cases where loans are sanctioned interest free (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. That is to say, 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 die loans.

10.3 Similarly in the case of interest free loans to departmental canteen where subsidy is also provided to meet running expenses, the sanction letter should stipulate that in the event of any default in repayment, the defaulted due would be recovered out of the subsidy payable. 

11. MISCELLANEOUS

11.1 A standard form prescribed for issue of loan sanctions (Appendix-I) should ordinarily be followed.

11.2 The date of drawal of a loan by the borrower will be date on which he received cash, cheque or bank draft from the drawing and disbursing officer. It should be ensured that the time lag between the date of obtaining the cash/ cheque/bank draft and its disbursement/delivery/despatch to the payee is reduced to the minimum. Where the cheque or bank draft is sent through post, the date of posting should be treated as the date of disbursement of the loan. The drawing and disbursing officer should invariably intimate the date of payment to his Accounts Office to enable the latter to make a suitable note in his records.

11.3 In the case of loans sanctioned to parties other than State and Union Territory and foreign Governments and Government servants, the borrower should tender the amounts due on or before the due date, at the New Delhi Head Office/main Office of the public sector bank accredited to the Ministry/ Department which sanctions the loan, in cash or by cheque or draft drawn on any scheduled bank in Delhi/New Delhi in favour of the said PSB Branch. The payment should be accompanied by a memorandum or challan in dublicate indicating (a) name of the loan sanctioning Ministry/Department; (b) No. and date of the loan sanction letter and the loan amount sanctioned; (c) amount due for payment separately for interest and principal and the head(s) of account to which the dues are to be credited in the Government Accounts; and (d) due date of payment. The borrowers should be asked to tender separate cheques/drafts and challans for payment of principal and interest.

Outstation loanees are required to arrange payment of the dues through their bank ensuring that the Memorandum/challan and the cheque/draft reaches the aforesaid PSB Branch in New Delhi by the due date.

11.4 Ministries/Departments are required to keep close watch on timely repayments of loans advanced by them and recovery of interest thereon. Note (4) below GFR 155(2) provides for a notice to be given to the borrowers a month in advance of the due date of payment of instalment of the principal and/or interest thereon. Such notices may be sent in the form given in (Appendix II). The borrower should not, however, be given any advantage in the event of non-receipt of such a notice.

Repayments/interest payments due from the loanees should also be reviewed, at least quarterly, and, where any default has occurred, a fresh notice should be served on the borrower to arrange payment with penal/higher rate of interest in the form set out in Appendix III.

11.5 Individual cases relating to terms and conditions of loans may not be referred to the Department of Economic Affairs (Budget Division) unless it is proposed to deviate from those laid down in this Office Memorandum.

Sd/-
(M. D. Pal) 
Director (Budget)

To

All Ministries, etc................

 

12. Monthly Reports of Defaults

 Ministries/Departments are required to submit to Budget Division a monthly report of defaults of Principal and interest in the form set out in Appendix IV. The report should be sent by the end of the month following the month to which the transactions relate.

[Refer Correction Slip158]

APPENDIX I 

Form of Sanction letter

To

(In the case of State and Union Territory Governments to be addressed to 

(i) Chief Controller of Accounts/Controller of Accounts Concerned. 

(ii) Secretary of the Administrative Department of the State/UT Government) 

(In other cases to be addressed to 

(i) The borrower.

(ii) Controller of Accounts of the Ministry/Department of...............................................................................................)

 

Subject:-

Sir,

        I am directed to convey the sanction of the President to the payment of loan of Rs .................................. (in figures) (Rupees............................................ (in words) to .....................................................................................................

2. The essential details are given in the Annexure to this letter.

3. (Conditions on fulfilment of which loan is to be sanctioned e.g. those given in Government of India's decision (3) below G. F. R. 155 as also G. F. Rs. 157 and 158 to be inserted, if necessary).

4. This sanction has been accorded in accordance with the rules/principles laid down with the previous consent of the Ministry of Finance and that the rate of interest on the loan and period of repayment thereof have been fixed in accordance with the existing instructions issued by them.

Yours faithfully,

(                   ) 

No...................................................Date.................................

Copy to the Accountant General concerned [in the case of States and Union Territory Governments only.]

 

Annexure to the Ministry/Department of______________________________________________________
letter No. ____________________________________________________Dated ____________________

LOANS AND ADVANCES BY CENTRAL GOVERNMENT

1. Name of the Borrower

___________________________________________

2. Amount sanctioned (in words & figures) Rs________________________________(in figures)
Rupees————————————————————-
3. Sanction valid upto

____________________________________________

4. The purpose of loan ____________________________________________
5. Payable in cash or by adjustment ____________________________________________
6. Plan/Non-plan (in case of Plan, category of Plan)

___________________________________________

7. Grant & sub-head under which amount sanctioned is debitable ____________________________________________
8. Progressive amount of loan sanctioned to the borrower to date in the financial year ___________________________________________
9. Period of loan

___________________________________________

10. Moratorium towards repayment, if any __________________________________________
11. Date and year from which repayment to commence __________________________________________
12. Mode of repayment __________________________________________
13. Interest :
(i) For loans to State Governments, Union Territory Governments and public sector enterprises.

__________________________________________

(a) normal rate

__________________________________________

(b) rebate for prompt repayments/interest payments

__________________________________________

(c) Penal rate of interest in the event of defaults in repayments/interest payments
(d) Mode of recovery of interest —
(ii) For parties other than State Governments, Union Territory Governments and Public Sector Undertakings. (as indicated in illustration in Office Memorandum)
Mode of recovery of interest
 

 

Signature _______________________________

(Seal of the sanctioning authority)

  

APPENDIX II

Notice 

No.............................................

OFFICE OF THE CONTROLLER OF ACCOUNTS

MINISTRY/DEPARTMENT OF ........................................

                                              New Delhi, dated the ................ ........

To _______________________________

Subject : Repayment of loan and payment of interest thereon.

Dear Sir,

According to the terms of the loan of Rs................................................sanctioned to you vide this Ministry/Department...................................... letter No. ..............................................dated..........................the annual repayment instalment and/or interest thereon, detailed below, will become due on ..........................

(i) Repayment ........................Rs. ————————————————
                                                            (in words & figures) 

(ii) Interest .............................Rs. ______________________________
                                                            (in words & figures)

2. Please arrange the payment by the due date. It should be noted that the amount of interest has been calculated on the assumption that payment will be arranged promptly ; otherwise it will be revised upwards in accordance with the terms of the loan.

3. The amounts due should be tendered, on or before the due date at the............................................................... 
(New Delhi head office/main office of the Public Sector bank (PSB) accredited to the Ministry/Department) 

in cash or by cheque or draft drawn on any scheduled bank/New Delhi in favour of the aforesaid PSB branch. The payment should be accompanied by a memorandum or challan, in duplicate, giving the following details:—

(i) Name of this Ministry/Department..................................
(ii) Name of the Borrower..................................................
(iii) No. and date of the loan sanction letter with the loan amount sanctioned....................................................
(iv) Amount due for payment, separately for interest and payment..........
(v) Due date of payment............................................
(vi) The head of the account indicated below, to which the amounts will be adjustable in Government accounts, should be included in the challan:—

Head of Account 

(i) Instalment of Principal
(ii) Interest

4. Separate cheque/draft and challans should be submitted for payment of principal and interest.

5. For outstation loanees, payment of dues together with memorandum/ challan is to be arranged through their bank to the aforesaid PSB branch in New Delhi by the due date.

Yours faithfully,
Accounts Officer

APPENDIX III

Important notice

No............................................
OFFICE OF THE CONTROLLER OF ACCOUNTS MINISTRY/DEPARTMENT ..................
                                                                    New Delhi, dated the..........

To_________________________________________
    ________________________________________
    ________________________________________

Subject:—Repayment of loan and payment 'of interest thereon. 

Dear Sir,

I am to state that the payment of Rs......................and Rs............................................... (as detailed below) representing Principal and interest respectively, which fell due on........................in respect of loans mentioned there against, has not so far been arranged by you.

Law sanction No. Date

(i) Principal ..........................

(ii) Interest............................

2. Please arrange to deposit the aforesaid amount to the account of the Government of India within 10 days of the issue of this letter, failing which other measures would be initiated.

In case the payment in question has already made to the Government particulars of the cheque/demand draft wad the date of deposit at the............................................................may be indicated immediately.)

(Name of Public Sector bank branch)

Yours faithfully,

Accounts Officer.

 

APPENDIX IV

MONTHLY REPORT

Defaults in Repayment of Loans and Payment of Interest

Organisations Defaults upto 31-3-86

Repayment of Loans 1986-87

Default upto 31-3-86

Payment of Interest 1986-87

Current due for 1986-87 Due upto the end of Actual repayment Upto Current dues for 1986-87 Due upto the end of Actual payment
Month Month Month
Month
State Governments*

---
---
---

 
PSU's*

---
---
---

 
Other Parties*

---
---
---

 

*States, PSU's or other parties where the cumulative defaults exceed Rs.1 crore may be identified separately. Others may be grouped.

Remarks: Reasons for default and action taken may be indicated.

[Refer Correction Slip158]