Mastering GFR 2017 (Part 7 - FINAL): The Final Rules - Externally Aided Projects, Guarantees & Establishment
⚠️ 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 the final part of our GFR 2017 exam success series! We've covered budgeting, accounting, procurement, property management, and grants. Now, we'll wrap up with the final three chapters, which are full of critical exam topics:
- Chapter 10: Externally Aided Projects (Foreign-funded projects)
- Chapter 11: Government Guarantees (When the govt acts as a guarantor)
- Chapter 12: Miscellaneous Subjects (Service Books, Claims, and Establishment matters)
This final chapter is especially important for all employees, so let's get started!
Part 1: Chapter 10 - Externally Aided Projects (Rules 264-274)
This chapter deals with projects financed by foreign sources like the World Bank, Asian Development Bank, and other international lenders.
Key Players:
- Nodal Agency (Rule 264(3)): The Department of Economic Affairs (DEA), Ministry of Finance, is the main agency that executes the legal agreements for all foreign loans or grants.
- The Accountant (Rule 264(4)): The Controller of Aid Accounts and Audit (CAAA) in the DEA is responsible for managing the accounts and payments for these projects.
How the Money Flows (Rule 267)
1. Reimbursement Procedure (Rule 267(1))
The Project Agency (e.g., a State Govt.) spends its own money first and then claims the amount back from the foreign agency through the CAAA. This is useful when the project agency has sufficient liquidity.
2. Direct Payment Procedure (Rule 267(2))
The foreign agency, on request, pays a contractor or supplier directly. No money passes through the Project Agency's hands. This is faster and reduces the project agency's cash burden.
Mandatory Conditions for EAP (Rule 265)
- Clearance from DEA: All externally aided projects must have prior approval from the Department of Economic Affairs.
- Terms & Conditions: The legal agreement between India and the foreign lender must be executed by the DEA on behalf of the Government of India.
- Project-specific Rules: The loan/grant agreement may have its own specific rules (interest rate, repayment period, end-use restrictions) which must be followed.
Part 2: Chapter 11 - Government Guarantees (Rules 275-283)
This chapter is about "contingent liabilities"—when the government acts as a "co-signer" or guarantor for a loan taken by another entity (like a PSU).
What is a Government Guarantee?
A government guarantee is a commitment by the government to pay the lender if the borrower (usually a PSU) defaults on a loan. It's like the government vouching for the PSU's creditworthiness.
Key Guarantee Rules
1. Why Give a Guarantee? (Rule 276)
The government's "sovereign guarantee" helps the PSU get loans at a much lower interest rate, making it cheaper for the PSU to borrow.
2. Who Approves? (Rule 275(3))
All proposals for guarantees *must* be approved by the Budget Division, Department of Economic Affairs (DEA).
3. Guarantee Fee (Rule 279(1))
The government doesn't do this for free. It charges a "Guarantee Fee" from the borrowing entity for taking on this risk. The fee is typically a percentage of the loan amount.
4. What if They Default? (Rule 283(1))
If the PSU defaults and the guarantee is "invoked," the government makes the payment from a special Guarantee Redemption Fund (GRF), which is maintained in the Public Account of India.
Part 3: Chapter 12 - Miscellaneous Subjects (V.V.I.P. for Exams!)
This chapter is a collection of the most practical and frequently tested rules for any government employee.
Your Service Book (Rule 288)
Your Service Book is the single most important record of your career.
- How many copies? (Rule 288(2)): It *must* be maintained in duplicate.
- Who holds them?
- The first copy is kept by the Head of Office.
- The second copy is given to the government servant for safe custody.
- Verification (Rule 288(1)): The Head of Office *must* verify the services recorded in the Service Book every year.
- Updating (Rule 288(3)): In January of each year, you hand over your copy to the office. The office updates it and must return it to you within 30 days.
Claim Submission Deadlines (Forfeiture)
If you don't submit your claims on time, they are forfeited. You must know these deadlines by heart.
| Type of Claim | GFR Rule | Deadline for Submission |
|---|---|---|
| Travelling Allowance (TA) | Rule 290 | Within 60 days of the completion of the journey. |
| Leave Travel Concession (LTC) (Advance Drawn) | Rule 292 | Within 30 days of completing the return journey. |
| Leave Travel Concession (LTC) (No Advance Drawn) | Rule 292 | Within 60 days of completing the return journey. |
| Overtime Allowance (OTA) | Rule 293 | Within 60 days of the due date (which is the 1st of the following month). |
Arrear Claims vs. Time-Barred Claims
1. Arrear Claims (Rule 295)
These are old claims (e.g., for salary, TA) that are *not yet* legally time-barred (i.e., less than 3 years old).
- Up to 2 years old: Can be paid by the DDO/Accounts Officer after usual checks.
- Over 2 years old: Must be investigated by the Head of the Department (HOD). If the HOD is satisfied it's genuine, it can be paid.
2. Time-Barred Claims (Rule 296)
This is a claim that *is* barred by the legal time limit (e.g., Limitation Act, generally 3 years).
The Rule: A time-barred claim cannot be paid by the HOD. It can only be paid with the express sanction of the Government, which must be issued with the previous consent of the Internal Finance Wing of the Ministry.
Other Key Rules from Chapter 12
- Security Deposits (Rule 306): Any government servant who actually handles cash or stores *must* furnish a security, usually in the form of a Fidelity Bond.
- Exemption from Security (Rule 306(4)): A permanent government servant can be exempted from furnishing security if they are officiating in a post for a short-term vacancy not exceeding four months.
- Refunds (Rule 301(2)): Before any refund of revenue is made, a note *must* be recorded against the original entry in the Cash Book to prevent a double or fraudulent claim.
- Destruction of Records (Rule 320): No government record connected with accounts shall be destroyed except in accordance with the rules in Appendix 9.
Summary of Part 7 (Series Conclusion)
- Chapter 10 (EAPs): Remember that the DEA is the nodal agency and the CAAA handles accounts. Know the two payment procedures (Reimbursement and Direct Payment).
- Chapter 11 (Guarantees): Remember that governments charge a Guarantee Fee and maintain a Guarantee Redemption Fund (GRF) in the Public Account for defaulted guarantees.
- Chapter 12 (Miscellaneous): Remember the Service Book is kept in duplicate. Know all the claim deadlines (TA: 60 days, LTC: 30 or 60 days, OTA: 60 days). Know the difference between Arrear and Time-Barred claims.
Congratulations! You've Mastered GFR 2017!
You have now completed all 7 parts of this comprehensive series on GFR 2017!
You now have a clear, exam-focused understanding of:
- ✅ The foundations and canons of financial propriety
- ✅ Budget planning and control of expenditure
- ✅ Government accounting and PFMS systems
- ✅ Procurement of goods and services
- ✅ Managing government property and contracts
- ✅ Giving money through grants-in-aid and loans
- ✅ Externally aided projects, guarantees, and establishment matters
You are ready for your departmental exam! 🎓
📚 Complete "Mastering GFR 2017" Series
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About This Series: This is Part 7 (FINAL) 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.
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