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Rule 272 - External Loan Interest | KartavyaDesk

GFR 2017

Original Rule Text

Rule 272 Interest Payments. Interest on external loans shall be paid on the due date as stipulated in the loan or credit agreements against the budget provision made for this purpose. Interest payments shall be accounted for as debit under the Major Head ‘2049-Interest Payments’ for external loans in the Consolidated Fund of India. The procedure for transfer of amount shall be the same as followed in the case of repayment of loans, referred to in Rule 271 above. The interest payment shall be classified as charged expenditure.

What This Means

Rule 272 of the General Financial Rules (GFR) 2017 deals with how the Indian government handles interest payments on loans taken from foreign entities. Essentially, it mandates that these interest payments must be made on time, as per the terms agreed upon in the loan agreement. The money for these payments must come from the budget specifically allocated for this purpose. This rule ensures India meets its financial obligations to international lenders and maintains its creditworthiness.

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

Key Points

  • •Interest payments on external loans must be made on the due date as per the loan agreement.
  • •Payments must be made from the budget provision allocated for this purpose.
  • •Interest payments are recorded under Major Head '2049-Interest Payments' in the Consolidated Fund of India.
  • •The process for transferring funds for interest payments is the same as for loan repayments (Rule 271).
  • •Interest payments are classified as 'charged expenditure,' meaning they don't require a vote in Parliament.

Practical Example

The Ministry of Infrastructure Development secured a loan of $50 million from the World Development Bank for a highway project. The loan agreement stipulates that interest payments of $2 million are due on June 30th each year. According to Rule 272, the Ministry must ensure that $2 million is available in the budget under Major Head '2049-Interest Payments' and that the payment is processed on or before June 30th. The process for transferring the funds from the Consolidated Fund of India to the World Development Bank will follow the same procedure as outlined for loan repayments in Rule 271. Failure to make the payment on time would violate the loan agreement and could negatively impact India's credit rating.

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 the budget allocation for interest payments is insufficient?▼
The department must immediately bring this to the attention of the Ministry of Finance to seek supplementary grants or re-appropriation of funds from other heads to ensure timely payment. Delaying payment can have serious consequences.
What is 'charged expenditure' and why is it important?▼
Charged expenditure means that the expenditure is not subject to a vote in the Parliament. This ensures that essential financial obligations, like interest payments, are met without delay, even if there are political disagreements.
Where can I find the details of the loan agreement and payment schedule?▼
The loan agreement and payment schedule are typically maintained by the department responsible for securing the loan, often in coordination with the Ministry of Finance and the Reserve Bank of India (RBI).
Does Rule 272 apply to interest payments on internal loans as well?▼
No, Rule 272 specifically addresses interest payments on external loans. Interest payments on internal loans are governed by other relevant rules and regulations.
What is Major Head '2049-Interest Payments'?▼
Major Head '2049-Interest Payments' is a specific accounting classification used in the Consolidated Fund of India to categorize and track all interest payments made by the government, particularly those related to external loans. This ensures transparency and accountability in financial management.

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 which Major Head in the Consolidated Fund of India are interest payments on external loans accounted for, as per Rule 272 of GFR 2017?

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

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