Rule 7 — GAR
Original Rule Text
7. Agreements of the Central Government with the Reserve Bank
The: Central Government has entered into an agreement with the Reserve Bank of India by virtue of which the general banking business of the Government (in which business is included the receipt, collection, payment and remittance of moneys on behalf of the Government) is carried on and transacted by the Reserve Bank in accordance with and subject to the provisions of the agreement: and of the Reserve Bank of India Act, 1934, and also in accordance with and subject to such orders as may, from time to time be given to the Reserve Bank by: the Central Government.
7. Reservists of the Indian Army employed under the Central or State Governments will, when called up for periodical military training receive military pay: and allowances. They will also receive the excess if any of their civil pay over military pay.
Provided that this concession is specifically sanctioned by Department of the Government of India or the head of the: attached or subordinate office concerned or by: the "State Governments in whose employ the reservists are serving in their civil capacity. Except where the civil pay of the reservists is met from the Defence Services Estimates the extra expenditure involved will not constitute a charge against the Defence Services Estimates.
7-A. Civil, Central or State Government servants who are members of the various Army, Navy, and Air Force Reserves (excluding the reserve of the officers) will when called up for periodical training receive pay and. allowances as under:-
(a): during the transit period they will be entitled to their civil rates of pay and allowances to be met from the Budget to which such expenditure is normally debitable.
(b) for the period of training (excluding period of transit) ff the pay and allowances (inllddig concessions in kind e.g. free ration etc.) admissible as a reservist: are less than the pay and allowances admissible in the civil post the difference will be paid and debited to: the Budget head to which the individual's civil pay: is normally debitable.
What This Means
Rule 7 describes the formal banking arrangement between the Central Government and the Reserve Bank of India. The Central Government has entered into a formal agreement with the RBI under which RBI carries out all general banking business of the government — receiving money, collecting revenues, making payments, and remitting funds — in accordance with the RBI Act 1934 and subject to the Central Government's orders.
This arrangement makes RBI the exclusive 'banker' for the Central Government. Unlike a private citizen who can bank anywhere, the Central Government's financial transactions must flow through RBI and its authorized agents (SBI and other designated banks). This centralisation ensures that all government transactions are captured in RBI's books, enabling accurate maintenance of the government's overall cash balance.
The practical implication for government officers is that all receipts must be deposited into the designated bank branches (which are agents of RBI), and all payments must be made through cheques drawn on these branches. Direct cash transactions outside this channel (except petty cash from imprest) are generally not permissible.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1The Central Government has a formal banking agreement with the Reserve Bank of India.
- 2Under this agreement, RBI handles all general banking business of the Central Government: receipts, collections, payments, and remittances.
- 3This arrangement is governed by the agreement and the RBI Act 1934, subject to orders of the Central Government.
- 4All receipts must be deposited in RBI or its designated agent banks; all payments must be made through cheques on these banks.
- 5RBI is the institutional mechanism that maintains the Central Government's cash balance and records.
- 6The arrangement ensures all government transactions are captured in a single banking system for consolidated accounting.
Practical Example
The Ministry of Commerce receives customs duty collections. All such receipts must be deposited into the designated SBI branches acting as agents of RBI, not into any other bank. The SBI branch sends daily scrolls to the Pay and Accounts Officer of the Ministry confirming the deposits, and these scrolls form the basis of accounting entries. If an officer were to deposit collections in a local cooperative bank 'for convenience', it would be a serious accounting irregularity as that bank has no agreement under Rule 7.
When the Ministry of Heavy Industries pays a contractor Rs. 45 lakh for machinery installation, the payment is made by a cheque drawn on the designated SBI branch. The SBI branch records this as a payment against the Ministry of Heavy Industries' account and sends a paid cheque scroll to the PAO. This scroll triggers the accounting entry debiting the expenditure head in the ministry's books.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
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This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.