Rule 280 — GFR

Rule 280 Execution of Government Guarantees.

(i) Once the guarantee is approved by Ministry of Finance, the guarantees will be executed and monitored by the Administrative Ministries concerned, who are also required to report the status in this regard on an annual basis till they are invoked or are obliterated. The following guidelines need to be kept in view while issuing guarantees-

(a) The obligations of the borrower to service the loan and the guarantee, and the monitoring of the utilization of the guaranteed loans, and adherence to the terms and conditions of the guarantee by the Borrower shall be ensured by the Administrative Ministry/ Department through a back- to- back agreement with the borrower which may be drawn up and implemented to the satisfaction of the Administrative Ministry concerned. For this purpose, necessary records to monitor the guarantee, including servicing of guarantee fee shall be maintained by the Line Ministries / Departments concerned.

(b) Administrative Ministry should ensure that there are no inconsistencies between the guarantee approval given by the Ministry of Finance and the guarantee agreement signed by it with the borrower. The obligations enforced by the Government as guarantor would be duly factored in.

(c) Deviations / modifications / amendments on the main conditions of the guarantee, particularly with reference to the rate of interest on the loan to be guaranteed and obligations of the Government to be covered, should not be referred in a routine manner to Budget Division for clarification/ change. The Administrative Ministry concerned shall make out a separate case, fully justifying the need for considering any proposed modifications / amendments, after thorough scrutiny of the request of the borrower for the same, before placing these proposals before the Budget Division for a final decision.

(d) In respect of bilateral and multilateral credit, Standard format of Guarantee of the lending institutions may be examined with a view that the same are not in contradiction with the conditions of sovereign guarantee prescribed in this chapter, before signing by the Administrative Ministry/ Department. The guarantee agreement may also not omit any conditions as brought out in this Chapter. New conditions or covenants, and differences, if any, shall be referred to Budget Division of the Department of Economic Affairs (DEA) for concurrence.

(e) Guarantee proposals approved by the Budget Division shall have to be executed in the same financial year. If the guarantee/ loan agreement is not signed in the same financial year as that of the approval of the guarantee proposal, the guarantee proposal shall have to be submitted again.

(f) The guarantee shall hold only for the specific purpose agreed to by the Budget Division.

(g) Guarantee given by Government of India shall be non - transferrable and would cease to exist in case the ownership of the entity is transferred from Government of India, unless the Guarantee is re- confirmed by the Budget Division.

(ii) The Financial Advisers in Ministry/ Department will perform the responsibility of maintenance of records and reporting including for the Finance Accounts and the IGAS, through the office of Controller/Chief Controller of Accounts.