Welcome to the third instalment of our blog series on The General Financial Rules (GFR) 2017. In this series, we have tried to explain the objectives, importance, structure, and brief about the chapters of GFR 2017, a foundational document for India’s public financial governance.
Before diving into the details of Chapters 7 to 12, let’s quickly recap what we have discussed so far.
Recap: What Are the General Financial Rules (GFR)?#
The General Financial Rules (GFR) is a comprehensive set of guidelines and instructions issued by the Government of India to ensure consistency, transparency, and accountability in all public financial matters.
Objectives of GFR 2017:
- Standardization of financial processes.
- Transparency in the utilization of public funds.
- Accountability to prevent misuse or mismanagement.
- Efficiency in financial transactions and governance.
Structure of GFR 2017#
GFR 2017 consists of 324 rules consolidated into 12 chapters, each addressing a critical aspect of financial governance. These chapters collectively provide a systematic and comprehensive approach to managing public finance.
In the previous blogs, we already covered the chapters from 1 to 6. Here, we have tried to focus on Chapters from 7 to 12.
This chapter outlines the policies for managing government-owned assets and resources.
- Receiving and Storing Goods: Establishes procedures for the receipt of goods and materials and safe custody of inventories such as counting, measurement or visual inspection (if applicable)
- Physical Verification: Outlines procedures and mandates periodic physical verification of assets and consumables, including library books and other valuable resources.
- Modes of Disposal: Provides guidelines for handling surplus, obsolete, or unusable items and disposal of assets
- Provisioning of Buffer Stock: Presents the requirement to maintain the buffer stock depending upon the frequency of requirement, quantity and pattern of supply of consumable material.
👉 Highlight: Encourages accountability and ensures efficient inventory management to manage public resources effectively.
Chapter 8: Contract Management#
Mandates the requirement for all contracts, which shall be made by an authority empowered to do so by or under the orders of the president as per the constitution of India.
- General Principles for Contracts: Covers the general principle for a contract such as the terms must be precise, definite and without any ambiguities and in cases where standard forms of contracts are not available, legal and financial advice should be taken to draft the contract.
- Management of Contracts: Explains the procedures for monitoring the contracts and issuing notices promptly whenever a breach of provisions happens. Also includes the guidelines for ensuring safe custody and monitoring of bank guarantees or other instruments.
- Legal Advice: Instructions for obtaining legal advice or invoking the arbitration clause as and when needed.
👉 Highlight: Ensures contracts are executed and enforced adequately.
Chapter 9: Grants-In-Aid and Loans#
This chapter addresses the rules for providing financial assistance to deserving organizations.
- Application and Sanctioning: Defines the principles and procedures for applying for, approving and awarding grants-in-aid.
- Avoiding Duplication: Maintenance of the register and stress the importance of preventing redundancy in grant approvals.
- Loans: Rules for observation by authorities to sanction loans of public money.
- Powers and procedures for sanctions of loans: The power of departments of the central government and Administrators as well as other subordinate authorities to sanction loans and the procedures for sanctioning them.
👉 Highlight: Ensures grants and loans serve their intended purpose and deliver maximum impact.
Chapter 10: Budgeting and Accounting of Externally Aided Projects#
This chapter focuses on the guidelines for budgeting aspect and implementation of projects or schemes through external aid receipt.
- Accounting and Withdrawal: Procedures for accounting of cash grants and withdrawal by concerned administrative ministries.
- Reimbursement: As per the reimbursement procedure, the project implementing agency shall initially spend or incur expenditure and subsequently claim the amount from the funding agency.
- Direct Payment: This includes the procedures for direct payment to the supplier, contractor or consultant from the loan or credit or grant account.
👉 Highlight: Focuses on how the funds will be accounted for, withdrawn and paid to the respective parties.
Chapter 11: Government Guarantees#
This chapter regulates the issuance of government guarantees to reduce financial risks.
- General Principle: Procedures for outlining the guidelines to grant and limit Government Guarantees.
- Risk Assessment: Provides guidelines for evaluating the risks associated with issuing guarantees.
- Guarantee Fees: Specifies rules for charging and collecting fees. It also includes the provision for a penalty in case the guarantee fee is not paid on the due date.
- Accounting of Guarantees: To ensure transparency, disclosure statements on guarantees given by the government must be published.
- Review and Monitoring: Ensures annual review is performed and regular monitoring for compliance with financial obligations by entities receiving guarantees.
👉 Highlight: Balances risk while supporting strategic projects critical to the overall development.
Chapter 12: Miscellaneous Subjects#
This chapter consolidates rules that do not fit precisely into other categories.
- Establishment Matters: Covers rules for staff additions, transfers, and other administrative changes.
- Public Debt and Provident Fund: Details the management of public debt, provident funds, and insurance policies.
- Refund of Revenue: Regulations for the sanctions of the refunds of revenue by the orders of an administrator or the departmental authority.
- Security Deposits: Instructions for government servants handling or storing cash according to circumstances and local conditions.
- Record Maintenance: Provides guidelines for keeping accurate financial records.
- Contingent Expenditure: Explains how to manage unforeseen or urgent expenses.
👉 Highlight: Addresses practical administrative challenges while maintaining a robust financial framework.
Role of Technology in GFR 2017#
Technology has been instrumental in modernizing the financial processes governed by GFR 2017.
- E-Procurement: The Government e-Marketplace (GeM) has made procurement transparent and efficient.
- Digital Payments: Platforms like PFMS (Public Financial Management System) enable real-time fund tracking.
- Automation in Audits: Digital tools enhance the accuracy and efficiency of financial audits.
- Data Digitization: Digital records ensure transparency, facilitate audits, and support informed decision-making.
Conclusion#
The General Financial Rules 2017 is the bedrock of India’s financial governance system. By promoting transparency, accountability, and efficiency, these rules ensure responsible management of public resources. Technology integration further strengthens their impact, enabling adaptability to modern challenges.
What’s your perspective on GFR 2017? Please share your thoughts or questions with us! If you found this blog informative, don’t forget to share it with your network.
In this three-part blog series, we have tried to cover briefly our interpretation of what GFR is and how it impacts the Indian financial ecosystem. But if you want to study or understand in detail, we suggest you to refer the official channel of the Government at https://www.youtube.com/@GovernmenteMarketplace.
