Rule 23 - Loan Repayment Rules

23. Loans and advances.– (1) All loans to State Governments, Administrations of Union territories, local bodies, foreign Government on specific recommendation of State Government, Government institutions and other Government bodies shall be regulated by the following general conditions contained in theGeneral Financial Rules, 2017, namely :-

(a) a specific term shall be fixed within which each loan has to be fully repaid with interest due and in very special cases, the term may extend to thirty years;

(b) the term is to be calculated from the date on which the loan is completely drawn or declared by competent authority to be closed;

(c) the repayment of loans shall be effected by installments, fixed on annual basis, with due dates of payment being specially prescribed;

(d) if an installment is paid before its due date, it may be taken entirely towards the principal, provided it is accompanied by payment towards interest due up-to-date of actual payment of installment; if not, the amount of the installment shall first be adjusted towards the interest due for preceding and current periods and the balance, if any, shall be applied towards the principal;

(e) when the due date of repayment of any installment of principal or interest falls on a Sunday or a public holiday or a holiday observed by the Reserve Bank, the payment made on the next working day following the Sunday or the public holiday, shall be regarded as payment on the due date and no interest shall be charged for the day or days by which the recovery is so postponed:

Provided that if an installment of principal or interest is payable on the thirty-first March of a year, and if that day happens to be a public holiday or as aforesaid, the recoveries shall be made on the immediately preceding working day;

(f) the payment of interest and the repayment of principal of a loan shall be made with reference to the calendar date on which the loan in question is paid and where payment of installment is in advance of the due date by fourteen days or less, interest for the full year or half year (depending on the prescribed mode of recovery) shall be charged thereon;

(g) in the case of a loan sanctioned by the Central Government to a State Government on or before thirtyfirst March of a year, which is adjusted in the books of the Reserve Bank in the month of April but in the

accounts of the previous year, the installment of principal and/or interest shall fall due for payment on the thirty first March of the succeeding year and not on the anniversaries of the calendar date in April on which the inter-Governmental adjustment was carried out.

The date of drawal of a loan by a State Government shall be determined as indicated below,–

(a) where monetary settlement is involved,–

(i) normally the calendar date on which amount of a loan is actually credited to the account of the State Government by the Reserve Bank is to be treated as the date of its drawal;

(ii) this position shall also hold in cases where adjustment in accounts is made in one month but date of adjustment in the books of the Reserve Bank falls in the following calendar month;

(iii) the calendar date on which the credit is actually afforded to the State Government in the books of the Reserve Bank in such cases shall be treated as the date of its drawal:

Provided that in the case of loans for which credit is afforded to the recipient State Government in the month of April by the Reserve Bank but in the accounts of previous year, a loan shall be deemed to have been paid on the thirty-first March of the financial year in the accounts for which the payment is adjusted:

Provided further that payment of annual interest as also repayment of instalment of principal in respect of such loans shall fall due on the thirty-first March of the succeeding years and not on the anniversaries of the calendar date in April on which inter- Governmental adjustment on account of such loans was carried out in the books of the Reserve Bank;

(b) where monetary settlement is not involved.–with regard to cases where adjustment in the books of the accounts offices are involved only and actual credit through the Reserve Bank is not necessary, the last date of the month of account in which the adjustment is effected shall be taken as the date of drawal of loan for purposes of repayment and charging interest.

(3) In order to avoid any default in the payment of loan, the Principal Accounts Officers or Pay and Accounts Officers who maintain the detailed accounts of loans, shall issue notices in Form GFR-19 to the loanees (other than State and Union territory Governments) i.e. Public Sector Undertakings, statutory bodies and Government institutions, a month in advance of the due date for the repayment of any installment of the principal and or interest thereon:

Provided that omission to give notice does not give the loanees any claim to exemption from the consequences of default in the repayment of the principal and or interest thereon.

Note1: The bills for loans and advances of different classes, which are granted by Central Government except in so far as they are governed by any special rules (e.g. loans of public moneys to State Governments, local administration of Union territories, local bodies, foreign Governments on specific recommendations of State Government, Government institutions and other Government bodies) issued by Government or contained in other part of these rules or in any authorised departmental regulations shall be drawn by the drawing officer of the office of the authorities sanctioning payment of loan or advance similar to bill format for release of Grants-in-aid.

Note 2: The bill shall be supported by a copy of sanction for such payment. amount repaid includes interest as well as principal, the interest must be separately specified.

Note 4: If the repayment is a fixed periodical amount, including both interest and principal, the orders fixing the amount shall be quoted.

(4) The special procedure for drawing of revenue advances which include takavi advances, advances under the Land Improvement Acts and any other advances which Revenue Officers are allowed or directed to make under the provisions of any law or under special order of the Government, shall be as specified in the Subsidiary Instructions.

Explanation.– Takavi works advances (ie. an advance to cultivators) in the form of expenditure on Takavi works in the Public Works Department are regulated by the departmental rules, except where the estimated cost of such works are recovered in the Public Works Department, recoveries of such advances shall be made by the Collector in the same way as arrears of land revenue.

(5)

(a) Advances granted under special orders of competent authority to Government officers for departmental or allied purposes may be drawn on the responsibility and receipt of the officer for whom they are sanctioned, subject to adjustment by submission of detailed accounts supported by vouchers or by refund within the period specified by Controller General of Accounts;

(b) in case of advances for survey and other departmental expenditure, which are ultimately recoverable from private owners or other parties, the duties such as maintaining detailed accounts of the advances, of watching their recoveries and of supervision, shall rest with the departmental authorities concerned, the PAO being responsible only for maintaining a plus and minus memorandum, where necessary, in accordance with the orders of the Government.

(6) The detailed procedure to be followed in connection with the grant of loans to local bodies shall be regulated by the provisions of the Local Authorities Loans Act, 1914 (9 of 1914) and other Acts in force in India and rules made thereunder.

What This Means

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Key Points

• 1Loans must be repaid within a fixed term, generally not exceeding 30 years in special cases.
• 2The repayment term starts from the date the loan is fully disbursed or declared closed.
• 3Repayments are made in fixed annual installments with specified due dates.
• 4Early payments are applied to the principal after covering accrued interest.
• 5If the due date falls on a holiday, payment on the next working day is considered on time.

Practical Example

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Frequently Asked Questions

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