Rule 281 - Government Guarantees | KartavyaDesk
Original Rule Text
(i) guarantees given to the RBI, other banks and industrial and financial institutions for repayment of principal and payment of interest, cash credit facility, financing seasonal agricultural operations and/or providing working capital to companies, corporations, cooperative societies and banks; (ii) guarantees given for repayment of share capital, payment of minimum annual dividend and repayment of bonds or loans, debentures issued or raised by the statutory corporations and central public sector undertakings; (iii) guarantees given in pursuance of agreements entered into by the Government of India with international financial institutions, foreign lending agencies, foreign governments, contractors, suppliers, consultants etc., towards repayment of principal, interest and/ or commitment charges on loans etc., and /or for payment against supplies of material and equipment; (iv) counter guarantees to banks in consideration of the banks having issued letters of credit or authority to foreign suppliers for supplies made or services rendered. (v) guarantees given to Railways for due and punctual payment of dues by Central Government companies or corporation; (vi) Others guarantees not covered under above five classes.
What This Means
Essentially, Rule 281 provides a framework for managing the government's contingent liabilities – potential future obligations that depend on certain events occurring. It ensures that guarantees are given responsibly and that the government is aware of its potential financial commitments. By classifying these guarantees, the government can better track and manage its financial risks and obligations.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- •Rule 281 categorizes guarantees given by the Government of India.
- •It covers guarantees to banks, financial institutions, and international entities.
- •Guarantees can be for repayment of principal, interest, share capital, or payment of dividends.
- •The rule includes guarantees related to international agreements and public sector undertakings.
- •It helps in managing the government's contingent liabilities.
Practical Example
Later, the Ministry of Power enters into an agreement with a German company, 'Siemens Energy,' for the supply of turbines for a new power plant. As part of the agreement, the Government of India provides a guarantee under Rule 281(iii) to Siemens Energy, ensuring payment for the turbines. This guarantee enhances the credibility of the project and encourages Siemens Energy to supply the equipment on time, contributing to the timely completion of the power plant.
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 Rule 281 of GFR 2017?▼
Who benefits from the guarantees covered under Rule 281?▼
What types of financial obligations can be covered by these guarantees?▼
How does Rule 281 help in international agreements?▼
What are contingent liabilities in the context of Rule 281?▼
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 281 of the General Financial Rules, 2017, which of the following scenarios would be covered under guarantees given by the Government of India?
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