Para 3.13.7 — MSO

Loans and advances 3.13.7 Government makes loans and advances to public and quasi-public bodies and to individuals. Some of these loans and advances are made under special laws and others for special reasons or in pursuance of a recognised policy. Audit has an important role to play in the present day context of large loans being granted to state governments, statutory corporations, government companies, quasi-public bodies, and private institutions for developmental and other purposes. Apart from watching the fulfilment of various conditions on which the loans are sanctioned, the responsibilities of Audit in relation to loans and advances will extend to the following:

(i) Except in the case of loans and advances made under special laws or in respect of which the Government has issued any general rules or orders, Audit may require that the reasons for making the loans or advances as well as the conditions attached to them should be stated clearly and completely in the relevant sanction orders. Any unusual conditions, such as the remission of interest in an individual case, included in the sanction would merit special scrutiny with a view to ascertaining the justification therefor.

(ii) Audit should ensure that the debtor has complied with the conditions governing repayment of a loan or advance and payment of interest.

(iii) In reviewing the outstanding loans and advances, special attention should be paid to irregularities in repayment, acknowledgement of balances and unrealised and doubtful assets.

(iv) In order to protect the financial interests of Government, the Accountant General (Audit) should communicate to Government any information that comes to his notice in the course of his official business in respect of the financial position of a debtor, along with such comments as he may consider appropriate. He should perform this duty personally and with the utmost care and discretion; the related communications should also invariably be confidential.

(v) Audit should ascertain whether adequate security has been obtained, particularly from private debtors, to safeguard Government’s interests, and whether Government has made adequate arrangements to keep itself informed of the continued solvency of the debtors.

(vi) It should also be verified that further loans have not been granted for the same purpose when substantial unutilised balances out of the previous loans are still available to the debtors and that there is adequate basis to establish that the loans have been utilised only for the purposes and on the objectives for which they were sanctioned.

The instructions contained Chapter 5 of this Section relating to audit of expenditure incurred by grantees from grants-in-aid provided by Government also apply mutatis mutandis in the case of loans given to any body or authority from the Consolidated Fund of India, of any State or of any Union Territory having a Legislative Assembly.