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Rule 280 - Guarantee Review | KartavyaDesk

GFR 2017

Original Rule Text

Government Execution (i) IGAS, through the office of Controller/Chief Controller of Accounts. Rule 281 (1) Review of Guarantees. All Ministries or Departments shall ensure that all guarantees are reviewed every year. The monitoring or review undertaken should examine whether the borrower is discharging repayment obligations or interest obligations as per terms of the loan agreement, whether the repaying capacity for the loan and guarantee amount is imposed in any manner, and whether all covenants and conditions are being religiously followed. The Financial Advisers of the Ministries or Departments should undertake these reviews. A copy of the review report including on timely and correct payment of guarantee fees, shall be forwarded by the Finance Advisor to the Budget Division by 30th April every year for the previous financial year. Rule 281 (2) The Financial Adviser of the Ministries or Departments would be responsible for ensuring that the annual reviews are carried out by the Ministries or Departments concerned. They shall also ensure that a register of guarantees in Form GFR 25 is maintained: - (i) to keep a record of guarantees; (ii) to retain information required from time to time in respect of guarantees; (iii) to keep record of the annual reviews to see that these are carried out regularly; (iv) to keep record of levy and recovery of guarantee fee; (v) to send data as contained in Form GFR 25, duly updated every year to the Budget Division in the Ministry of Finance, Department of Economic Affairs by tenth of April. Rule 281 (3) In respect of guarantees issued by the Ministry of Finance for external loans, the respective credit divisions of Department of Economic Affairs shall conduct an annual review in consultation with the Financial Adviser (DEA). For this purpose, the Financial Adviser (DEA) shall ensure the maintenance of the required registers, as well as ensure that the annual reviews are carried out by the concerned credit divisions, and report forwarded to the Budget Division in Form GFR 25. In cases, where the guarantees on external loans are issued by the concerned administrative Ministry, that Ministry would be responsible for conducting the review.

What This Means

Rule 280 of the General Financial Rules (GFR), 2017, focuses on the crucial annual review of guarantees provided by the government. Think of a guarantee as the government vouching for someone else's loan or financial obligation. This rule ensures that ministries and departments don't just issue guarantees and forget about them. They need to actively monitor the situation to protect public funds.

The rule mandates a yearly check-up on these guarantees. This review looks at whether the borrower is making timely payments, if their ability to repay is still sound, and if they're sticking to all the terms and conditions of the loan agreement. The Financial Advisor of each ministry/department is responsible for conducting this review and sending a report to the Budget Division of the Ministry of Finance. This helps the government keep track of its financial commitments and identify any potential risks early on.

Furthermore, the Financial Advisor is responsible for maintaining a register (Form GFR 25) of all guarantees, ensuring it's updated regularly, and submitting the data to the Budget Division. This register acts as a central repository of information, making it easier to manage and monitor the government's guarantee portfolio. For external loans guaranteed by the Ministry of Finance, the Department of Economic Affairs (DEA) takes the lead on the annual review, in consultation with their Financial Advisor.

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

Key Points

  • •Mandatory annual review of all government guarantees.
  • •Financial Advisors are responsible for conducting the review and reporting to the Budget Division.
  • •Review includes assessing borrower's repayment capacity and adherence to loan terms.
  • •Maintenance of a guarantee register (Form GFR 25) is required.
  • •For external loans, the Department of Economic Affairs (DEA) conducts the review.

Practical Example

The Ministry of Textiles provided a guarantee of ₹50 crore to 'Weave India Ltd.' for a loan they took to modernize their production facilities. As per Rule 280, the Financial Advisor of the Ministry of Textiles, Mr. Sharma, must conduct an annual review. He examines Weave India Ltd.'s financial statements, repayment schedule, and compliance with the loan agreement. He discovers that Weave India Ltd. has been consistently making timely payments and their financial health is stable. Mr. Sharma then prepares a report summarizing his findings and submits it to the Budget Division of the Ministry of Finance by April 30th. He also updates the guarantee register (Form GFR 25) with the review details. If, however, Mr. Sharma found that Weave India Ltd. was struggling to make payments, he would highlight this in his report, prompting further investigation and potential action to mitigate the risk to the government's guarantee.

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 purpose of reviewing government guarantees annually?▼
The annual review ensures that the government is aware of the risks associated with its guarantees and can take timely action to protect public funds. It helps monitor the borrower's ability to repay and compliance with loan terms.
Who is responsible for conducting the annual review?▼
The Financial Advisor of the concerned Ministry or Department is responsible for conducting the annual review. For guarantees on external loans issued by the Ministry of Finance, the respective credit divisions of the Department of Economic Affairs (DEA) conduct the review in consultation with the Financial Advisor (DEA).
What is Form GFR 25 and why is it important?▼
Form GFR 25 is a register used to record and track all government guarantees. It contains essential information about the guarantees, including the borrower, loan amount, terms, and review details. Maintaining this register is crucial for effective management and monitoring of the government's guarantee portfolio.
What happens if the annual review reveals that the borrower is facing financial difficulties?▼
The Financial Advisor must highlight this in their report to the Budget Division. This will trigger further investigation and potential action to mitigate the risk to the government's guarantee, such as working with the borrower to restructure the loan or taking steps to recover the guaranteed amount.
What is the deadline for submitting the annual review report to the Budget Division?▼
The Financial Advisor must submit a copy of the review report, including details on timely payment of guarantee fees, to the Budget Division by April 30th every year for the previous financial year. The updated data in Form GFR 25 must be sent by the tenth of April.

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 280 of the General Financial Rules, 2017, which entity is primarily responsible for conducting the annual review of guarantees issued by a Ministry or Department?

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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