KartavyaDesk

Rule 264 - External Aid Projects | KartavyaDesk

GFR 2017

Original Rule Text

Rule 264 (1) Implementation of Projects or Schemes through external aid receipt. The projects or schemes of the Government of India to be implemented through external aid receipt from multilateral or bilateral funding agencies shall be shown in the budget proposals approved annually by the Parliament. Rule 264 (2) The external aid comes from bilateral and multilateral sources as follows: (i) Bilateral funding to finance specific project(s) by the funding agency(ies) under Governmentto-Government agreement(s); and, (ii) Multi-lateral funding by MultiLateral Funding Agencies, such as the World Bank under agreement(s) between the borrower (Government of India) and the Multilateral Funding Agency(ies). Rule 264 (3) The Department of Economic Affairs, Ministry of Finance as the nodal agency shall execute the legal agreement for loans or grants from external funding Agency(ies). However, grant agreements for Technical Assistance can also be executed by the beneficiary Ministries or Departments with the approval of Ministry of Finance, Department of Economic Affairs. Rule 264 (4) The Office of the Controller of Aid Accounts and Audit (CAAA) in the Department of Economic Affairs, Ministry of Finance shall be responsible for implementing the financial covenants laid down in the agreement(s) executed by Department(s) of Government of India and the External Funding Agency(ies). A copy of all such agreements shall be sent to the Office of Controller, Aid Accounts and Audit, Department of Economic Affairs for this purpose. Rule 265 Currency of external aid. The external aid shall flow from the Funding Agency in foreign currency or Indian Rupees and shall be received by the Reserve Bank of India, Mumbai which shall remit the rupee equivalent to the account of Controller, Aid Accounts and Audit, Department of Economic Affairs at Reserve Bank of India, New Delhi. The remittances shall be accounted as external loan/Grant receipts in the Consolidated Fund of India. Rule 266 Accounting of Cash grants. Cash grants, as distinct from commodity grant or other assistance in kind received from

What This Means

Rule 264 of the General Financial Rules (GFR) 2017 deals with how the Indian government manages projects and schemes funded by external aid, meaning money received from other countries or international organizations. Think of it as a set of instructions for handling projects financed by loans or grants from entities like the World Bank or individual countries. This rule ensures transparency and proper accounting of these funds.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Key Points

  • •External aid projects must be included in the annual budget approved by Parliament.
  • •External aid can come from bilateral (government-to-government) or multilateral (e.g., World Bank) sources.
  • •The Department of Economic Affairs (DEA) is the main agency for loan and grant agreements, but beneficiary ministries can handle technical assistance grants with DEA approval.
  • •The Controller of Aid Accounts and Audit (CAAA) ensures financial terms of agreements are followed.
  • •External aid is received in foreign currency or Rupees by the Reserve Bank of India (RBI), which then transfers the Rupee equivalent to the CAAA.

Practical Example

The Ministry of Rural Development wants to implement a new rural road construction project with a loan of $50 million from the World Bank. Before the project can begin, the Ministry must include the project and its funding source in its budget proposal, which needs to be approved by the Parliament. The Department of Economic Affairs (DEA) negotiates and signs the loan agreement with the World Bank. A copy of this agreement is sent to the Controller of Aid Accounts and Audit (CAAA). The World Bank disburses the funds in US dollars to the RBI, which converts it to Rupees and transfers it to the CAAA's account. The CAAA then monitors the project's financial progress to ensure it complies with the loan agreement terms.

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 a ministry spends external aid funds on something not specified in the agreement?▼
The Controller of Aid Accounts and Audit (CAAA) is responsible for monitoring compliance with the financial covenants of the agreement. If funds are misused, the CAAA will report the violation, and corrective action, including potential repayment of funds, will be required.
Can a state government directly receive external aid?▼
No, external aid is received by the Government of India. The central government may then allocate funds to state governments for specific projects as per the agreement terms.
What is the role of the RBI in external aid management?▼
The Reserve Bank of India (RBI) receives the external aid in foreign currency or Rupees from the funding agency. It converts the foreign currency to Rupees and remits the equivalent amount to the Controller of Aid Accounts and Audit (CAAA).
Who is responsible for ensuring the project aligns with the overall development goals of the country?▼
While the Department of Economic Affairs handles the financial agreements, the concerned ministry or department implementing the project is responsible for ensuring the project aligns with national development goals and priorities.
What is Technical Assistance grant?▼
Technical Assistance grant is a grant provided by external funding agencies for expertise, training, or consultancy services to improve the capacity and efficiency of government departments or projects. Unlike loan agreements, these grant agreements can be executed by the beneficiary Ministries or Departments with the approval of Ministry of Finance, Department of Economic Affairs.

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 264 of GFR 2017, which body is primarily responsible for executing legal agreements for loans or grants received from external funding agencies?

Related Rules

Rule 271General Financial Rules 2017 (amended July 2024) - Rule 271 - Chapter 10Rule 109General Financial Rules 2017 (amended July 2024) - Rule 109Rule 146General Financial Rules 2017 (amended July 2024) - Rule 146 - Chapter 6Rule 169General Financial Rules 2017 (amended July 2024) - Rule 169 - Chapter 6Rule 215General Financial Rules 2017 (amended July 2024) - Rule 215 - Chapter 6

Need help understanding this rule?

Ask Niti — your AI assistant for GFR 2017 and other government rules