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Rule 275 - Government Guarantees | KartavyaDesk

GFR 2017

Original Rule Text

Rule 275 (1) Power to Give and Limits on Government Guarantees. The power of the Union Government to give guarantees emanates from and is subject to such limits as may be fixed in terms of Article 292 of the Constitution of India, the Fiscal Responsibility and Budget Management Act and Rules framed there under as amended from time to time.

What This Means

Rule 275 of the General Financial Rules (GFR), 2017, is all about government guarantees. Think of a guarantee like a promise from the government to pay someone's debt if they can't. This rule clarifies that the Union Government's power to give these guarantees isn't unlimited. It's governed by Article 292 of the Constitution, the Fiscal Responsibility and Budget Management (FRBM) Act, and any rules made under that Act. These laws set limits on how much the government can guarantee to keep our finances in check.

Essentially, this rule ensures that the government doesn't over-promise and put the nation's financial stability at risk. It applies whenever a government department or agency considers providing a guarantee for a loan, project, or other financial obligation. It directly affects all government departments, agencies, and any entity seeking a government guarantee, as it dictates the permissible limits and conditions for such guarantees.

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

Key Points

  • •Rule 275 governs the Union Government's power to provide financial guarantees.
  • •The power is limited by Article 292 of the Constitution, the FRBM Act, and related rules.
  • •The rule aims to maintain fiscal responsibility and prevent excessive government liabilities.
  • •It applies to all government departments and agencies considering issuing guarantees.
  • •Guarantees are promises by the government to cover debts if the borrower defaults.

Practical Example

The Ministry of Infrastructure Development is considering providing a guarantee for a loan of ₹500 crore taken by the National Highway Construction Corporation (NHCC) from a consortium of banks for a new highway project. Before approving the guarantee, the Ministry's finance department must verify that the proposed guarantee complies with the limits set by the FRBM Act and related rules. They need to ensure that the total outstanding guarantees of the Union Government, including this proposed guarantee, do not exceed the permissible percentage of GDP as mandated by the FRBM Act. If the guarantee pushes the total beyond the limit, it cannot be approved, or the Ministry needs to explore alternative financing options that don't require a government guarantee. This ensures the government doesn't overextend its financial commitments.

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 a government guarantee in the context of Rule 275?▼
A government guarantee is a commitment by the government to cover the debt or obligation of another entity (like a public sector undertaking) if that entity fails to meet its financial obligations.
What is the FRBM Act and why is it relevant to Rule 275?▼
The Fiscal Responsibility and Budget Management (FRBM) Act sets targets for reducing the fiscal deficit and public debt. It's relevant because it places limits on the government's ability to provide guarantees, ensuring fiscal prudence.
Who is responsible for ensuring compliance with Rule 275?▼
The finance department of the concerned ministry or department is primarily responsible for ensuring that any proposed government guarantee complies with Rule 275 and the related regulations.
Can the government provide unlimited guarantees under Rule 275?▼
No, the government's power to provide guarantees is limited by Article 292 of the Constitution, the FRBM Act, and rules framed thereunder. These regulations set limits on the total amount of guarantees that can be outstanding at any given time.
Where can I find the specific limits on government guarantees mentioned in Rule 275?▼
The specific limits are detailed in the FRBM Act and the rules framed under it, as amended from time to time. Consult the latest notifications and circulars issued by the Ministry of Finance.

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 275 of the General Financial Rules, 2017, the Union Government's power to give guarantees is primarily derived from and limited by which of the following?

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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