-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:
- 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.
- General Principles for setting up of Autonomous Organizations referred to under Rule 206 (a)
(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.
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.
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.
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.
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:
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.
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.
- 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.
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.
In all other cases, the Institution or Organization shall get it accounts audited from Chartered Accountants of its own choice.
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.
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.
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.
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.
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.
Grants, subventions, etc., including grants to States other than those dealt with in the foregoing rules, shall be made under special orders of Government.
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:
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.
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:
(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.
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.
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.
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.
(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.
(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.
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 :-
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:
(ii) Before approving the loan, the applicant should be asked to furnish the following materials and information:
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-
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.
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.
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.
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.
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.
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.
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.
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.
(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.
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.
- 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.
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.
(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.
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.
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.
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.
Procedure to be followed in case of defaults in repayment of interest free loans or loans sanctioned at concessional rates of interest:
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.
Irrecoverable Loans: A competent authority may remit or write off any loans owing to their recoverability or otherwise.
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.
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.
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.
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.
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.