Sanction of loans are issued by Ministries/Departments relating to loans and grants in accordance with the guidelines provided in chapter 11 of the General Financial Rules.

General guidelines and instructions in regard to the interest rates to be charged, period of repayment to be fixed for loans.   Detailed accounts of which are required to be mentioned by the pay and accounts office, that office should see that the conditions of repayment thereof are completed with by the loanee and should exercise a close watch over repayment of principal  and realisation of interest.  In the case of loans to  public sector undertakings, statutory bodies, institutions etc. (other than State/U.T Govts.) the Accounts officer maintaining the detailed accounts shall issue notices a month in advance of the due date of repayment an default in payment , either of principal or of interest by all loanees should be reported without delay to the authority which had sanctioned the loan or the advance.  If that authority enforces any penal interest upon the overdue instalment of interest, or principal and interest it shall be the duty of the Pay and Accounts Office to watch its recovery .

Loans to State governments are debitable to the major head “7601-Loans ands Advances to State Governments” and are treated as ‘charged’ items of expenditure.