Rule 256 - Loan Utilization | KartavyaDesk
Original Rule Text
Rule 256 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. (2) (i) The certificate referred to in Rule 256above shall be furnished as in Form GFR 12-B and at such intervals as maybe 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 shall 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 shall 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 shall give details of the breaches, if any, of those conditions. (ii) A Certificate of Utilization of the loan shall be furnished to the Accounts Officer in every case of loan made for specific purposes, even if of the any conditions is 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 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 shall furnish the Utilization Certificate in respect of each individual case. (iv) Where the detailed accounts of the loans are maintained bythe
What This Means
GFR Rule 256 focuses on ensuring that loans given by the central government are used for the intended purpose. It's all about accountability and making sure taxpayer money is spent wisely. This rule requires that a 'Utilization Certificate' is provided, confirming that the loan was used as agreed upon when it was sanctioned. This certificate is like a receipt showing where the money went and that it fulfilled its intended purpose. This rule doesn't apply to loans given to State Governments or the Local Administrations of Union Territories; it primarily concerns other entities receiving loans from the central government.
The rule outlines the process for obtaining and submitting this Utilization Certificate. The officer providing the certificate needs to be sure the loan conditions are being met. They might ask for reports and statements to prove the loan was used correctly. Sometimes, the organization receiving the loan (the 'loanee institution') will also need to get a certificate from their own auditors. This certificate should detail any instances where the loan conditions weren't followed. The frequency of these certificates is determined by agreement between the Audit Officer/Accounts Officer and the relevant Ministry or Department.
Importantly, a Utilization Certificate is always required for loans given for specific purposes, even if no specific conditions are attached to the grant. However, certificates aren't needed for loans that are simply temporary financial aid or loans to Public Sector Undertakings (PSUs) for their approved capital expenses. Even when a Utilization Certificate isn't required, the repayment of the loan still needs to be carefully monitored.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- •Rule 256 mandates the submission of Utilization Certificates to ensure loans are used for their intended purpose.
- •The rule applies to loans sanctioned by the central government, excluding those to State Governments and Union Territories' local administrations.
- •Certifying officers must verify that loan conditions are being met before issuing the Utilization Certificate.
- •Utilization Certificates are generally required for loans with specific purposes, but exceptions exist for temporary financial aid and PSU capital outlays.
- •Repayment of all loans, regardless of Utilization Certificate requirements, must be monitored.
Practical Example
The Ministry of Textiles sanctioned a loan of ₹5 crore to 'Handloom Cooperative Society Ltd.' for the specific purpose of modernizing their looms. According to Rule 256, the Handloom Cooperative Society Ltd. must provide a Utilization Certificate to the Accounts Officer of the Ministry of Textiles. Before issuing the certificate, Mr. Sharma, the certifying officer in the Ministry, requests quarterly progress reports from the Society, detailing the purchase and installation of new looms. He also requires a certificate from the Society's auditor confirming that the loan funds were used solely for loom modernization and that all terms of the loan agreement are being followed.
If the Society had instead received a loan of ₹2 crore as temporary financial assistance to cover operational expenses during a period of low sales, a Utilization Certificate would not be required under Rule 256. However, the Ministry would still need to diligently track the repayment of the ₹2 crore loan according to the agreed-upon schedule.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
What is a Utilization Certificate, and why is it important?▼
Does Rule 256 apply to all types of government loans?▼
What happens if the loan conditions are not being met?▼
Are there any situations where a Utilization Certificate is not required?▼
Who is responsible for ensuring that the loan is used for the intended purpose?▼
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 GFR Rule 256, which of the following loans is EXEMPT from the requirement of submitting a Utilization Certificate?
Related Rules
Need help understanding this rule?
Ask Niti — your AI assistant for GFR 2017 and other government rules