Mastering GFR 2017 (Part 1): The Foundations & The 4 Canons of Financial Propriety
⚠️ Educational Disclaimer
This content is for educational purposes only. While we've prepared this series based on the General Financial Rules (GFR) 2017 (Updated 31st July 2025), please note that:
- This is a simplified interpretation of GFR 2017 for examination preparation
- Errors or omissions may occur despite our efforts to ensure accuracy
- For official, authoritative information, always refer to the official GFR document
- Neither the author nor the website assumes responsibility for any damages, losses, or consequences arising from reliance on this content
- Always verify critical information with your department's official channels before implementation
Introduction
Welcome to our new series for acing your departmental exams! We're diving deep into the General Financial Rules (GFR), 2017, the rulebook for how the Government of India handles money.
Today, we're starting with the absolute basics from Chapters 1 & 2: Who's who in the zoo, and what are the fundamental rules of spending public money?
Chapter 1: Introduction (The "Who's Who" Guide)
Think of Chapter 1 as the "Definitions" section of your exam paper. You must know the key players and terms.
- Competent Authority: The person or body with the financial power to sanction expenditure. This is the authority you seek approval from.
- Drawing and Disbursing Officer (DDO): The Head of Office or any Gazetted Officer designated to draw bills and make payments on behalf of the government. They are the ones who sign your bills and salary.
- Head of the Department (HOD): An authority declared as such (not below a Deputy Secretary) to exercise delegated financial powers.
- Recurring vs. Non-Recurring Expenditure: Recurring is expenditure that happens at periodical intervals (like salaries, rent). Non-recurring is a onetime expenditure (like the purchase of a building or a vehicle).
🧠 Easy Way to Remember: The 3 Funds of Government
This is a classic exam question. All government money is kept in three separate "chests" or Funds as defined in the Constitution.
1. Consolidated Fund of India (Article 266(1))
What it is: This is the main bank account of the government. All revenues (like taxes) and all loans taken by the government go into this fund.
How money comes out: No money can be taken out of this fund except after Parliament passes an Appropriation Act (i.e., passes the Budget). Your salary comes from here.
2. Public Account of India (Article 266(2))
What it is: This is the government's "locker". The money in this account does not belong to the government. It is money held in trust.
Examples: Your GPF contributions, savings scheme deposits, security deposits from contractors.
How money comes out: Since it's public money (not government's), it can be paid back to the rightful owner without Parliament's approval.
3. Contingency Fund of India (Article 267(1))
What it is: This is the government's emergency fund or imprest. It's a fixed amount of money (set by Parliament) placed at the disposal of the President.
How money comes out: It is used to meet unforeseen expenditure (like a natural disaster) before Parliament can approve it.
Important: All money taken from this fund must be "repaid" later by getting Parliament's approval and drawing from the Consolidated Fund.
Chapter 2: General System of Financial Management
This chapter lays down the most important principles of handling government money. It covers Receipts, Expenditure, and Losses.
Part 1: Receipts (Rules 7-20)
The Core Principle: You must account for every paisa received.
- Rule 7: All money received by or on behalf of the government (dues, deposits, etc.) must be brought into the Government Account without delay. You cannot keep government revenue in an office drawer.
- Rule 12: You cannot leave government dues (like rent for a building, fees, etc.) outstanding without sufficient reason.
Part 2: Expenditure (Rules 21-32)
This is the most critical part of the GFR for your exam. It defines the standards expected of every government servant.
🧠 Easy Way to Remember: The 4 Canons (Principles) of Spending
| Canon | Principle | Simple Explanation |
|---|---|---|
| 1. The Prudence Rule | Exercise same vigilance as ordinary person with own money | Don't be wasteful |
| 2. The Necessity Rule | Expenditure not prima facie more than occasion demands | Don't book 5-star hotel for 1-hour meeting |
| 3. The No Self-Benefit Rule | Don't sanction expenditure for own direct/indirect advantage | Can't sanction contract for relative's company |
| 4. The No Favors Rule | Money not for benefit of particular person/section UNLESS enforced in court or recognized policy | Follow policy-based, not personal, spending |
Other Key Expenditure Rules
Rule 22: Authority for All Expenditure
You cannot spend any money or enter into any liability without a sanction from a Competent Authority.
Rule 30: Lapse of Sanction (Another Exam Favourite)
The Rule: A sanction for any fresh charge (e.g., a non-recurring grant) will LAPSE if no payment (in whole or in part) has been made within 12 months from the date of its issue.
The Exceptions (When it does NOT lapse):
- Sanctions for permanent establishment or for allowances for a post
- Sanctions specified to be for a specific financial year (they lapse at the close of that year)
- For purchase of stores, if the tender has been accepted or indent has been placed within the 12-month period
Part 3: Losses (Rules 33-38)
The Core Principle: If you lose government money or property, you MUST report it.
- Rule 33: Any loss or shortage of public money, stores, or property must be immediately reported to the next higher authority, the Statutory Audit Officer, and the Accounts Officer. Exception: Not required for "petty losses" of value not exceeding ₹10,000.
- Rule 34: If a loss is due to suspected fire, theft, or fraud and exceeds ₹50,000, it must be reported to the Police for investigation as early as possible.
- Rule 37: An officer is held personally responsible for any loss caused by their own fraud or negligence.
Summary of Part 1
Congratulations! You've just learned the absolute foundations of GFR.
Chapter 1: You know the key players (DDO, HOD) and the 3 Funds (Consolidated, Contingency, Public).
Chapter 2: You know the 4 Canons of Financial Propriety (Prudence, Necessity, No Self-Benefit, No Favors), the Lapse of Sanction rule (12 months), and the Loss Reporting rules (immediately, and to police if over ₹50,000).
Series Navigation:
Coming Up Next...
In Part 2, we'll cover Chapter 3: The Money Plan, where we'll see how the Budget is formulated, sanctioned, and controlled.
About This Series: This is Part 1 of a comprehensive 7-part series on GFR 2017 for government employees preparing for departmental exams. Each part covers specific chapters with exam-focused concepts, case studies, and memory tricks.
Blog: Government Employees Hub
Are you a Central Government Employee?
Don’t stay in the dark! Vital updates on Service Rules, Pension policies, and your career are happening right now.
Add as Preferred Source on Google
Follow us to ensure our latest exclusive reports appear first in your Google Search and Discover feed.
Comments
Post a Comment