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Rule 271 - Loan Repayments | KartavyaDesk

GFR 2017

Original Rule Text

Repayment of loans. Office of Controller of Aid Accounts and Audit shall be responsible for prompt repayment of principal on the due date as per the agreements. The remittance of foreign currency is arranged through designated Public Sector Commercial Banks and Reserve Bank of India. The Rupee equivalent and the amount of foreign currency remitted shall be intimated by the Banks to Controller of Aid Accounts and Audit. The Rupee equivalent of the foreign currency remitted is credited to the respective Banks’ account maintained at Reserve Bank of India, New Delhi, by debit to Controller of Aid Accounts and Audit’s account as per standing arrangement. On the receipt of the advice from Reserve Bank of India, New Delhi, Controller of Aid Accounts and Audit shall debit the concerned loan account in the Consolidated Fund of India. The repayment of loans shall be classified as charged expenditure. In cases where the funds from externally aided Projects are further passed on as

What This Means

Rule 271 of the General Financial Rules (GFR) 2017 focuses on how the government repays loans, especially those received as foreign aid. It essentially outlines the process for ensuring that loan repayments are made on time and accurately, as per the loan agreements. The Office of Controller of Aid Accounts and Audit (CAA&A) is the main entity responsible for managing these repayments. This rule ensures transparency and accountability in handling borrowed funds and their subsequent repayment.

The process involves several steps, including converting the repayment amount into foreign currency through designated banks, informing CAA&A about the transaction, and then debiting the appropriate loan account in the Consolidated Fund of India. This ensures that all loan repayments are properly recorded and accounted for. The rule also specifies that these repayments are classified as 'charged expenditure,' meaning they don't require a vote in Parliament for approval, highlighting their mandatory nature.

In simple terms, Rule 271 ensures that when India borrows money, especially from international sources, the repayment process is well-defined, transparent, and managed effectively by the CAA&A, involving banks and the Reserve Bank of India to ensure smooth foreign currency transactions and accurate accounting within the government's financial system.

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

Key Points

  • •CAA&A is responsible for prompt repayment of loans as per agreements.
  • •Foreign currency remittance is handled through designated Public Sector Commercial Banks and RBI.
  • •Rupee equivalent of foreign currency remitted is credited to banks' account at RBI.
  • •CAA&A debits the concerned loan account in the Consolidated Fund of India upon advice from RBI.
  • •Repayment of loans is classified as charged expenditure.

Practical Example

The Indian government received a loan of $5 million from the World Bank for a rural electrification project. The due date for the first principal repayment installment is approaching. The CAA&A, under Rule 271, initiates the process. They work with the State Bank of India (SBI), a designated Public Sector Commercial Bank, to convert the required Rupee amount into US dollars.

SBI remits the $500,000 (installment amount) to the World Bank and informs CAA&A of the exchange rate and the Rupee equivalent. SBI's account at the RBI is credited with the Rupee equivalent, and CAA&A's account is debited. Upon receiving confirmation from the RBI, the CAA&A debits the specific loan account related to the rural electrification project within the Consolidated Fund of India. This ensures the repayment is accurately recorded and classified as charged expenditure, meaning it doesn't require parliamentary approval for disbursement.

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 role of the Controller of Aid Accounts and Audit (CAA&A) under Rule 271?▼
The CAA&A is primarily responsible for ensuring the prompt repayment of loans on the due date as per the loan agreements. They coordinate with banks and the RBI to manage the foreign currency remittance and ensure accurate accounting within the Consolidated Fund of India.
What does 'charged expenditure' mean in the context of loan repayments under Rule 271?▼
'Charged expenditure' means that the repayment of loans does not require a vote in Parliament for approval. It is a mandatory expenditure that is automatically debited from the Consolidated Fund of India.
Which banks are involved in the remittance of foreign currency for loan repayments?▼
Designated Public Sector Commercial Banks are involved in the remittance of foreign currency. The specific banks are chosen based on agreements and operational efficiency. Reserve Bank of India also plays a key role.
What happens if there is a delay in the repayment of a loan under Rule 271?▼
While Rule 271 focuses on the process of repayment, delays can result in penalties and affect India's credit rating. The CAA&A is responsible for ensuring timely repayment to avoid such consequences.
How does Rule 271 ensure transparency in loan repayment?▼
Rule 271 ensures transparency by involving multiple entities (CAA&A, designated banks, RBI), requiring detailed documentation of the transaction (Rupee equivalent, foreign currency remitted), and classifying the repayment as charged expenditure, subject to audit.

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 271 of the General Financial Rules, 2017, which entity is primarily responsible for ensuring the prompt repayment of principal on loans as per the agreements?

Related Rules

Rule 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 6Rule 273General Financial Rules 2017 (amended July 2024) - Rule 273 - Chapter 10

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