Rule 258 — GFR

Rule 258 (1) 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 shall invariably include provision for the levy of penal interest on overdue installments of interest or principal and interest. The loan sanctions and agreements in all other cases shall 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 per cent per annum above the normal rate of interest prescribed by Government from time to time for the loans advanced.

Rule 258 (2) 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.

Rule 258 (3) Procedure to be followed in case of defaults in repayment of interest free loans or loans sanctioned at concessional rates of interest:

(i) In the case of grant of interest free loans e.g., loans to technical educational institutions for construction of hostels, prompt repayment shall be made a condition for the grant of interest free loans. The sanction letter in such cases shall provide that in the event of any default in repayment, interest at rates prescribed by Government from time to time will be chargeable on the loans.

(ii) In the case of loans sanctioned at concessional rates of interest the difference between the normal rate and concessional rate), shall be made conditional upon prompt repayments of principal and payment of interest thereon by the entity concerned.

(iii) In the cases where in addition to interest free loans, subsidy is also provided to meet running expenses the sanction letter shall provide that in the event of any default in repayment, the defaulted dues would be recovered out of the subsidy payable.

Rule 258 (4) 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 shall ordinarily be asked 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 up to the date of settlement of the default. The recovery of additional interest shall not be waived except in special circumstances or where the period of defaults is very short, e.g., a few days.