Rule 250 - Government Loan Requirements | KartavyaDesk
Original Rule Text
(ii)Before approving the loan, the applicant shall be asked to furnish the following materials and information:- (a) copies of profit and loss (or income and expenditure) accounts and balance sheets for the last 3 years; (b) the main sources of income and how the loan is proposed to be repaid within the stipulated period; (c) the security proposed to be offered for the loan together with a valuation of the security offered by an independent authority and a certificate to the effect that the asset offered as security is not already encumbered. (d) Details of loan or loans taken from the Central Government or a State Government in the past, indicating amount, purpose, rate of interest, stipulated period of repayment, date of original loan and amount outstanding against the loan(s) on the date of the application and the assets, if any, given as security; (e) a complete list of all other loans, outstanding on the date of application and the assets given as security against them; (f) the purpose for which the loan is proposed to be utilized and the economics of the scheme.
What This Means
Rule 250 of the General Financial Rules (GFR), 2017, outlines the information and documentation required from an applicant before a loan can be approved by the government. Think of it as a checklist to ensure the government is making a sound lending decision. This rule applies whenever a government employee or entity is seeking a loan from the government. It's designed to protect public funds by thoroughly vetting loan applications.
Essentially, the rule ensures transparency and accountability. It requires the applicant to provide a clear picture of their financial health, their ability to repay the loan, and the security they are offering. This includes details about their income, existing debts, and the purpose for which they need the loan. By following this rule, the government can minimize the risk of loan defaults and ensure that public money is used responsibly.
This rule directly affects anyone applying for a loan from the government, as they must provide all the required documentation. It also affects the government officials responsible for reviewing and approving loan applications, as they must ensure that all the requirements of Rule 250 are met before granting the loan.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- •Applicants must provide financial statements (profit/loss, balance sheets) for the last 3 years.
- •Applicants must detail their income sources and how they plan to repay the loan.
- •Applicants must provide details of the security offered, including a valuation from an independent authority and confirmation it's unencumbered.
- •Applicants must disclose details of any existing loans from Central or State Governments.
- •Applicants must clearly state the purpose of the loan and the economic viability of the project.
Practical Example
Mr. Sharma, a government employee, wants to take a loan from the government to start a small business. Before his loan application can be approved, he needs to provide copies of his income tax returns for the past three years, a detailed plan outlining how he intends to repay the loan within the stipulated period, and a valuation report for the property he's offering as security. The valuation report, prepared by a government-approved valuer, states the property is worth ₹50 lakhs and is free from any existing mortgages. He also needs to declare that he has an existing housing loan from a nationalized bank and provide details like the outstanding amount and repayment schedule. Finally, he must submit a project report explaining the business plan and projected profitability.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
What happens if the applicant doesn't provide all the required documents?▼
Who qualifies as an 'independent authority' for valuing the security?▼
Does this rule apply to all types of loans from the government?▼
What if the asset offered as security is partially encumbered?▼
Is a personal guarantee sufficient as security under Rule 250?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Test Your Knowledge
Question 1 of 3
According to Rule 250 of the General Financial Rules, 2017, for how many years prior to the loan application must an applicant provide profit and loss (or income and expenditure) accounts and balance sheets?
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