GFR Rule No. 250 Part-3 | The Complete Framework for Repayment of Government Loans

🔸 How Government Loans Must Be Repaid Under GFR 250

🔸 Government loans are not personal funds; they are public money. That is why repayment rules must be precise, structured, and strictly enforced.

🔸 GFR Rule 250 establishes the full discipline, timelines, and compliance framework regulating how every government loan must be repaid, regardless of the borrower.

1. Fixed and Defined Repayment Terms
🔸 Every loan must have a specific repayment period, and it should be as short as possible. Extension is allowed only in exceptional cases and never beyond 30 years.

• Repayment begins from the date the loan is fully drawn, or
• The date the competent authority formally declares the loan closed.

2. Repayment Through Instalments
🔸 Loans are normally repaid annually in clearly defined instalments with prescribed due dates.

• Early payment adjusts first towards interest due.
• If interest is fully paid, the balance adjusts to principal.
• If not fully paid, payment first clears past and current interest, then principal.
• If paid within 14 days before the due date, full half-year or full year interest is charged as prescribed.

3. Holidays and Special Dates
🔸 If the due date falls on a Sunday or public holiday, payment on the next working day is treated as on time.

• Exception: if the due date is 31 March, recovery must happen on the previous working day.
• If payment requires settlement through the Reserve Bank of India and the due date is an RBI holiday, the date shifts to the next working day, except for 31 March.

4. Determination of Drawal Date
🔸 For loans to State Governments, the official drawal date is when the Reserve Bank of India credits the amount to the State’s account.

• Accounting adjustments do not change the actual credit date.
• If credited in April but adjusted to the previous financial year, the drawal date is treated as 31 March.
• Where only book adjustment occurs, the last day of that month becomes the drawal date.

5. Preventing Default
🔸 Principal Accounts Officers or Pay and Accounts Officers must issue notices about one month before the due date.

• Even if notice is not received, responsibility remains with the borrower.

6. Loans to Private Institutions, Strict Pre-Sanction Checks
🔸 Before sanctioning loans to private bodies, departments must examine:

• Financial health and managerial capability.
• Income sources and repayment capacity.
• Last three years’ financial statements.
• Details of earlier loans.
• Independent valuation of proposed security.
• Proof that assets are unencumbered.
• Economic justification of the scheme.

🔸 Security must be at least 33 per cent higher than the loan amount. Poor past performance results in outright rejection.

7. Loans Along With Grants
🔸 When grants are also involved:

• Income earmarked for repayment cannot reduce deficit for grant calculation.
• The scheme should ideally be self-financing.
• States or management must undertake to cover any shortfall.

8. Periodic Review of Outstanding Loans
🔸 Ministries must regularly review outstanding loans to ensure timely recovery and prevent defaults.

9. Loans to Local Bodies
🔸 Loans to municipalities, panchayats, and local bodies are governed separately under the Local Authorities Loans Act and related rules.

🔸 Core Message of Rule 250: Government loans are not merely financial assistance, they are structured commitments. Both borrower and government must operate under strict discipline, defined timelines, and strong financial control.

🔸 GFR Rule 250 ensures that every rupee of public money is recovered with certainty, accountability, and transparency.

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