Rule 268 - Direct Payments | KartavyaDesk
Original Rule Text
Rule 268 (3) Fund flow for State Projects under Direct Payment Procedure. Under Direct Payment Procedure the claims shall be processed as mentioned in Rule 267 (ii). Office of Controller of Aid Accounts and Audit shall work out the Rupee equivalent of such Direct Payment based on Reserve Bank of India buying rate applicable for the value date on which the Direct Payment was made. Office of Controller of Aid Accounts and Audit shall consolidate such disbursement in Rupees, and send a list of such disbursement State- wise to Plan Finance Division of Department of Expenditure at periodical intervals requesting them to release the amount to the State concerned notionally and recover the same for credit to Controller of Aid Accounts and Audit’s account. The Plan Finance Division shall issue a separate sanction for the amount to be released to the State concerned and for simultaneous recovery and credit back to the account of the Controller of Aid Accounts and Audit. A copy of such sanction shall also be endorsed to the Finance Department of the State Government concerned. The office of the Chief Controller of Accounts, Ministry of Finance shall advise Reserve Bank of India, Central Accounts Section, Nagpur, for making necessary adjustment entries in the accounts of the State concerned under intimation to the Finance Department of the State and Controller of Aid Accounts and Audit. This completes the cycle of funds flow in the case of direct payment claims.
What This Means
Rule 268 of the General Financial Rules (GFR) 2017 outlines the process for managing funds when payments for state projects are made directly by external aid agencies (like the World Bank) instead of going through the state government first. This is called the 'Direct Payment Procedure.' Essentially, it's about ensuring the money reaches the state and is properly accounted for, even though the initial payment bypasses the usual channels.
The Controller of Aid Accounts and Audit (CAA&A) plays a central role. They convert the foreign currency payment into Indian Rupees using the RBI's exchange rate on the payment date. Then, they inform the Department of Expenditure's Plan Finance Division (PFD) about the disbursement. The PFD then releases the equivalent amount to the state 'notionally' (meaning on paper) and simultaneously recovers it to credit back to the CAA&A's account. This ensures the central government's books reflect the transaction. Finally, the Reserve Bank of India (RBI) adjusts the state's accounts accordingly, completing the cycle.
This rule is important for state governments receiving foreign aid, the CAA&A, the PFD, the RBI, and anyone involved in managing externally aided projects. It ensures transparency and accountability in the flow of funds from international donors to state-level projects, even when direct payments are involved.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- •Deals with fund flow for state projects under Direct Payment Procedure.
- •Controller of Aid Accounts and Audit (CAA&A) converts foreign currency payments to Rupees.
- •Plan Finance Division (PFD) releases funds notionally to the state and recovers them for CAA&A.
- •RBI adjusts state accounts to reflect the direct payment.
- •Ensures accountability and transparency in externally aided projects.
Practical Example
The Uttar Pradesh Irrigation Department is implementing a World Bank-funded canal project. The World Bank directly pays a German engineering firm, 'BauTech GmbH,' €500,000 for providing specialized equipment. The CAA&A calculates the Rupee equivalent based on the RBI's buying rate on the date of payment (let's say it comes to ₹4,50,00,000). The CAA&A informs the PFD, which then issues a sanction to release ₹4,50,00,000 to Uttar Pradesh notionally and simultaneously recovers the same amount to credit the CAA&A's account. The RBI then adjusts Uttar Pradesh's accounts, and the UP Finance Department is notified. This ensures the state benefits from the project while maintaining proper accounting at the central level.
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 the 'Direct Payment Procedure'?▼
Who is the Controller of Aid Accounts and Audit (CAA&A)?▼
What does 'notionally' released mean?▼
Why is this procedure necessary?▼
What exchange rate is used for conversion?▼
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
Under Rule 268 of GFR 2017, which organization is responsible for converting the foreign currency direct payment into its Rupee equivalent for State Projects?
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