MANUAL OF SAVINGS BANK ACCOUNT

Transcription

1 ( FOR OFFICE USE ONLY ) Office of the Accountant General (Accounts & Entitlement) Karnataka, Bangalore MANUAL OF SAVINGS BANK ACCOUNT (FOURTH EDITION) 2006 Indian Audit & Accounts Department

2 TABLE OF CONTENTS SAVINGS BANK ACCOUNTS Sl. No. Description Para No. CHAPTER I Introduction 01 Introduction 1 CHAPTER II 02 Work of the Section Savings Bank Current Deposits Savings Bank Fixed Deposits Savings Certificates Guarantees given by the State Government for loans raised by local bodies etc. 07 Calendar of Returns CHAPTER III Savings Bank Current Deposits 08 General Check of Savings Bank Journals Depositor s Ledgers Clearance of transfers Broadsheets of Savings Bank Transactions Interest on Minor s Accounts Interest on Closed Accounts CHAPTER IV Miscellaneous Items of Work 15 Annual adjustment of Interest on Savings Bank Deposits Page No Check of Interest Statements for the period prior to Silent Accounts Silent Account Ledger Objections in Accounting Annexure 1 12 CHAPTER V Fixed Deposit Receipts 21 Receipts and check of accounts received from the Treasury Subsidiary Registers of Receipts & Payments Transfers Broadsheet of Fixed Deposits Check of Annual Accounts Interest due on Fixed Deposit standing in the name of Minor 27 Fixed Deposit Receipts pledged as Security to a Recognised Bank

3 Sl. Description No. CHAPTER VI Savings Certificates 28 Receipt and check of accounts received from the Treasury Para No. Page No Receipt of Accounts from the Treasury Verification of Savings Certificates figures with Treasury Account of Receipts and Disbursements 31 Examination of Summaries Half Margin Memoranda CHAPTER VII Guarantee given by the State Government for Loans raised by Local Bodies, Quasi Government Institutions 33 General Register of Guarantees Appendix I 23 Appendix II 31 Appendix III 41

4 TABLE OF CONTENTS REMITTANCE SECTION Sl. No. Description Para No. Page No. CHAPTER - I 01 Introduction Constitution Work of the Section Distribution of work Duties and Responsibilities Calendar of Returns CHAPTER II 07 Remittance Transfer Receipts Issue Lists Paid Lists Posting of Payments Check of Postings Lapsed Bills CHAPTER III 13 Charitable Endowments Register of Interest on charitable, educational and other endowment funds CHAPTER IV Miscellaneous (Suspense) 15 Cheques Linking of Treasury paid cheques with the list of cheques issued and preparation of list of unpaid cheques CHAPTER V Alteration Memoranda 17 Alteration Memoranda 18 Appendix I 20

5 P R E F A C E To the Fourth Edition This is the fourth edition of the Manual of Savings Bank Account. The last edition of the Manual had been brought out during December There are no significant changes in the contents of this manual as from the previous manuals as principles of accounting of Savings Bank Account transactions remain the same. The responsibility of keeping this Manual up-to-date rests with SB and Remittance Section. If any error or omission is noticed in this compilation, it may kindly be brought to the notice of the Group Officer. Any suggestion for further improvement of the manual will be highly appreciated. 25 th September, 2006 (L.ANGAM CHAND SINGH) Accountant General (A&E)

6 Chapter I Introduction Savings Bank Accounts CHAPTER I INTRODUCTION 1.01 Savings Banks were established by the Government of Karnataka under the Government Savings Bank Act, 1873 for all District Treasuries and all Taluk Treasuries in 9 Districts of Bangalore, Kolar, Tumkur, Shimoga, Chickmagalur, Mysore, Chitradurga, Hassan and Mandya with a view to providing a ready means for the deposit of savings and so to encourage thrift. After the transfer of seven taluks of erstwhile Bellary District from Madras State with effect from , Savings Banks were established in the treasuries of transferred territories of Bellary District also. In pursuance of the provisions contained in Federal Financial Integration of States with Government of India, the Central Savings Bank Act, 1873 came into force in Mysore from and the Mysore Government Savings Bank Act which had been till then in force ceased to be in force in Mysore from that date vide Government Circular No. FL (B) B&T dated Note: Government Savings Bank Act 1873 is reproduced on pages 1 to 7 of the Savings Bank Manual (1970 Edition) 1.02 Government have also introduced schemes of fixed deposit for periods of 5 years and 10 years in Government Order No. FL GF dated and Notification No. FL (B) B&T dated Two more schemes of 5 year Savings Certificate and 12 years Certificate also These schemes of fixed deposit and savings certificates have, however, been withdrawn from as per Government Order No. FL (B) Bud dated Manual of Savings Bank Account Page No. 1

7 Chapter I Introduction 1.04 The transactions of Savings Bank in the Treasuries of Old Mysore State are being governed by the Government Savings Bank Rules issued from time to time in implementation of the provisions contained in Government Savings Bank Act The treasuries in the territories transferred to Mysore under the State Reorganisation Act of 1956 have not been declared as Savings Banks. Manual of Savings Bank Account Page No. 2

8 Chapter II CHAPTER II Work of the Section 2.01 The work of the section is divided into two main branches viz (i) Savings Bank Transactions and (ii) Guarantees given by the State Government in respect of loans raised by local bodies, co-operative societies etc. The returns furnished by the treasuries periodically are the journal (statement) of deposits and withdrawals in Form 9 of S.B. Manual along with warrants of payments and journal of transfers (para 5 of the S.B. Manual). The accounting work connected herewith is detailed below Savings Bank Current Deposits (i) Check of journals of deposits and withdrawals and connected documents such as vouchers, challans etc. (ii) Consolidation of district figures for the whole State. (iii) Agreement of the Consolidated figures with those in the detail book. (iv) Maintenance of silent account register. (v) Scrutiny of applications for revival of silent accounts received from treasury officers and communication of sanction (vide rule 43 of the S.B. Manual) 2.03 Savings Bank Fixed Deposits (i) Maintenance of Fixed Deposit Registers. (ii) Maintenance of Broadsheets and agreement of the figures with book figures Savings Certificates (i) Posting of Savings Certificates. (ii) Maintenance of Broadsheet and agreement with book figures Guarantees given by the State Government for loans raised by local bodies etc. Maintenance of Register of guarantees in the form given in the Annexure III. Manual of Savings Bank Account Page No. 3

9 Chapter II 2.06 Calendar of Returns The Calendar of Returns of the Savings Bank Section is given in Appendix II. Manual of Savings Bank Account Page No. 4

10 Chapter III Savings Bank Current Deposits CHAPTER III SAVINGS BANK CURRENT DEPOSITS 3.01 General Savings Bank transactions are regulated by the rules contained in the Government Savings Bank Act, 1873 and the Savings Bank Rules, as modified from time to time. (Authority: Para 4 of Manual of S.B. Section 1960) The transactions of sub-treasuries at Taluks are brought to account in Savings Bank journal (Form No.9 of S.B. Manual) in the order of their occurrence The daily totals of receipts and payments are brought on day books and all challans, index cards, vouchers and closed pass books are sent to the District Treasury along with the daily sheet. At the District Treasury, the transactions of sub-treasuries as reported through daily sheets are incorporated in Form MTC 87. The District Treasury Officer will also prepare the statement of deposits and withdrawals in Form No. 9 of S.B. Manual for the transactions at his District Treasury and forward the same to this office on or before the 4 th of the following month, along with the accounts of sub-treasuries after proper scrutiny and after attaching the warrants of payments, journal of transfers relating to the transactions of the whole District. The index cards and the challans including those of the sub-treasuries arranged serially and also the closed pass books will be retained in the District Treasury. The Central Treasury Section will agree the total of the District journals with the monthly Treasury Accounts of Receipts and Disbursements and record a certificate to that effect before the journals are transmitted to the S.B. Section. The S.B. Section should maintain a register showing the due dates and the actual dates of receipt of the journals and submit a report to the Branch Officer on the 15 th of every month regarding non-receipt of the journals. Manual of Savings Bank Account Page No. 5

11 Chapter III Savings Bank Current Deposits 3.02 Check of Savings Bank Journals: The opening balance of an account shown in it should be checked with the closing balance of that account in the previous journal in which the account was lasat affected. Amount in the withdrawal column should be checked with vouchers (100%). Closing balance worked out in the journal should be checked with reference to the entries regarding opening balance, deposits and withdrawals. After check the journals should be kept on record sub-treasury wise/ treasury wise Depositor s Ledgers: Prior to , a ledger was kept in each treasury in Form SB 10 for recording receipts and payments in a separate account for each depositor. Duplicate ledgers were also maintained in this office for each treasury (District or Taluk) in a number of bund volumes in Form No. SB 10 of S.B. Rules, one page being invariably devoted to an account. For the period commencing from , the District Treasury Officer maintains ledgers in Form No. 10 of S.B. Manual 1970 in addition to maintenance of duplicate ledgers in respect of the transactions of sub-treasuries working under his control (vide subsidiary Rule 5 of Section III of SB Manual 1970). But duplicate ledgers will not be maintained in this office in respect of transactions of Treasury Savings Bank taking place on and after Clearance of transfers: A depositor may have his account transferred from any one Savings Bank to any other in the Old Mysore State as it existed prior to , the date of Reorganisation of States. Transfers between one treasury and another are made in accordance with Rule 11 of Section A and Rule 45 of Section III of Savings Bank Manual, 1970 edition. It is essential to see that the amount brought on to the credit of a depositor in the receiving treasury agrees with the amount at his credit in the transferring treasury. It is the duty of this office to see that the debit and credit tally. The monthly lists of journals of transfers debited and credited (Forms 15 and 16 of S.B. Manual 1970) should be examined and the totals checked. Manual of Savings Bank Account Page No. 6

12 Chapter III Savings Bank Current Deposits It should be seen that the debits are properly responded to and there are no outstandings at the end of the year Broadsheets of Savings Bank Transactions A Broadsheet in Form MSO (T) 129 is maintained of the credits, debits and balances under the head Savings Bank Current Deposits. The Credits and Debits are posted monthly from the statement of Deposits and withdrawals of Savings Bank received monthly from the Treasuries in the Revised Form SB 9 vide OO No. SB/Genl/66-67/208 dated The State totals are agreed with the postings in the Detail Book and the Broadsheet submitted to the Gazetted Officer in-charge for inspection on the 30 th of the second month after indicating action taken to reconcile the differences, if any, between the Broadsheet figure and the Detail Book figure. The opening balances are brought forward from the past year broadsheets after the current balances are worked out in the column for March final. The monthly balances in the new years Broadsheet, will then be struck and agreed with the Detail Book figures month by month. At the end of the year, balances should be communicated to the District Treasury Officers concerned for intimating their acceptances or otherwise of the same. (Authority: Rule 40(e) of the Mysore Government Savings Bank Manual (1970)) 3.06 Interest on Minor s Accounts: Interest due on Savings Bank Account of a minor should not be paid to the guardian after the minor attains majority. Interest due on ex-minor s account after the date of his attaining majority will be paid by the treasuries to the ex-minor after obtaining a fresh Index Card as per Rules. Interest on the account of a deceased depositor, will be paid only upto a period of six months from the date of death vide Rule 8(6) of Section II Part A of S.B. Manual (1970). But, in the case of such account pledged as security, interest will be allowed until the release of security, i.e., upto the end of the month preceding the date of security. (Authority: Government of Karnataka, Department of Finance, OM No. FD 73 RTM 69 dated ) Manual of Savings Bank Account Page No. 7

13 Chapter III Savings Bank Current Deposits 3.07 Interest on Closed Accounts: When a depositor wishes to close his account in the course of the year, the interest to end of the month preceding the month in which the account is desired to be closed will be calculated and credited by Treasury Officer to the account and paid by the Treasury Officer to the depositor with the principal. When an account is closed, the pass book will be surrendered to the Treasury Savings Bank. As regards the adjustment of Interest on accounts closed during the year, the interest paid will be worked out from the statements received every month from the Treasury Officers and accounts adjustments effected as per instructions contained in letter No. 88/Admn.II/ dated from the Comptroller and Auditor General. For this purpose, the SB Section will maintain a register wherein details of interest adjusted such as account number, months to which interest is paid, amount of interest paid, TE number in which adjustments are effected, are noted. Note: The District Treasury Officers can waive under intimation to the Director of Treasuries and the Accountant General, excess or short payment of interest upto Re.1/- (Rupee one only) made on Savings Bank Current Deposit Accounts, as well as, closed accounts, due to errors in the calculation of Interest committed by the Treasury staff on the afore mentioned accounts and when such errors come to light subsequently. (Authority: Finance Department s O.M. No. FD 39 RTM 70 dated & Additional A.G. s Order s on the file dated ) Manual of Savings Bank Account Page No. 8

14 Chapter IV CHAPTER IV Miscellaneous Items of Work MISCELLANEOUS ITEMS OF WORK 4.01 Annual adjustment of Interest on Savings Bank Deposits: The District Treasury Officers intimate the total interest calculated and paid in respect of the transactions of his District on all accounts current as on 31 st March for adjustment in the books of this office before the accounts of the year are closed at any rate not later than 15 th of June. An adjustment will be made for interest allowed on Current Deposit Accounts and accounts closed during the year by debit to the Head of Account Interest payments and credit to Savings Bank Deposits Current Deposits Check of Interest Statements for the period prior to : The interest statements for the period prior to received from Treasury in Form No. 11 should be checked in detail with the ledger s maintained in this office. The closing balance for the previous year, total deposits and withdrawals during the year, interest allowed on the account, etc., should be checked with the figures in the ledger. The Accountant should then certify that the statement has been checked by him. After this is done, the statement should be put up to the Section Officer who should check it to the extent prescribed in the Secret Memorandum of Instructions and attest the enfacement regarding the checks exercised. After the statement has been passed by the Section Officer, it would be returned to the Treasury concerned with an order allowing interest which has accrued for the period to which the statement relates and permitting the entry of the amount therein in the S.B. ledger maintained by the Treasury and in the Pass Books of the Depositors. (Authority: Additional A.G s orders dated on page 11 of the file) 4.03 Silent Accounts: Where no deposit into, or withdrawal from, an account has taken place for six complete years, then such an account will be treated as a silent account. No transaction will Manual of Savings Bank Account Page No. 9

15 Chapter IV Miscellaneous Items of Work be allowed by Treasury Officer in respect of a silent account without prior sanction of this office. A list of silent accounts will be rendered to this office in Form No. 12 of Government S.B. Manual (1970). The silent accounts will be brought on to the Dead Account ledger maintained in this office from the list of Silent Accounts received from the Treasury Officers and the total for the year adjusted by debit to Savings Bank Current Deposits and credit to Savings Bank Silent Accounts Silent Account Ledger: There should be one Silent Account Ledger for each District in which the full particulars of items proposed to be transferred to Silent Account by the District Treasury Officer are copied from the list received from the Treasury Officer at the end of the year. The total amount from these ledgers will be transferred to Savings Bank Silent Accounts by Debit to Savings Bank Current Deposits before the accounts of the year are closed and the reference to the transfer entries will also be indicated therein. Interest due on the Silent Accounts will not be calculated or added so long as the accounts are on the Silent Account Ledger. Application for revival of Silent Account received from the Depositor through the Treasury Officers will be scrutinised and sanctions thereto will be communicated in the Form prescribed in Rule 43 of Section III of Government Savings Bank Manual Interest will be calculated and added on to these revived accounts upto the end of the year preceding the year of revival. The revival also will be noted in the Silent Account Ledger under the initials of the Gazetted Officer. The details of items revived are collected in a Register of Revival of S.B. Accounts in the form indicated in the Annexure to this Chapter. The monthly adjustment of amount revived from Silent Account will be made with reference to this Register by crediting Savings Bank Current Deposits and debiting Savings Bank Silent Accounts (for the amount originally transferred) and 2049 Interest Payments (for interest allowed on the amount revived). Manual of Savings Bank Account Page No. 10

16 Chapter IV Miscellaneous Items of Work Reference to the monthly adjustment made should also be indicated in the Register of Revival. A Broadsheet in Form M.S.O (T) 129 is maintained indicating the credits, debits and balances under the head Savings Bank Silent Accounts. The Credits and Debits are posted from periodical adjustment entries made by this office. (Authority: Order of the Accountant General dated ) 4.05 Objections in Accounting Objections arising during accounting in the S.B. Sections shall be noted in an Objection Book and the money value entered under the column For Other Reasons specifying briefly the nature of objection raised. Manual of Savings Bank Account Page No. 11

17 Chapter IV ANNEXURE 1 Miscellaneous Items of Work Sl. No. SAVINGS BANK SILENT ACCOUNTS REVIVED FOR THE MONTH OF Unit No. Name of the District Treasury Name of the Sub- Treasury Year of Transfer to Silent Account S.B. Account No. Amount Transferred to Silent Account Gross Interest from the time of Silent Account to time of Revival Excess of short interest if any, relating to the period prior to transfer to Silent Account (+ or -) Net Interest Total Month of Initials of Section Branch Remarks (Col. 8+9 or 8-9) admissible amount revived (Col. 7-10) Revival Accountant officer Officer Manual of Savings Bank Account Page No. 12

18 Chapter V CHAPTER V Fixed Deposit Receipts FIXED DEPOSIT RECEIPTS 5.01 Receipt and check of accounts received from the Treasury: The issue of new Fixed Deposit Receipts has been stopped from as per G.O. No. FL(B)10979 Bud, dated All blank forms of the Fixed Deposit Receipts held in the treasuries were destroyed. Thereafter except 100 blank forms of each of the denominations which were required to be kept in the custody of the Officer in charge of the State Huzur Treasury for issue of duplicate receipts in lieu of Fixed Deposit Receipts lost, or destroyed. Consequent to the transfer of stamp work of the Superintendent of Stamps to the Department of Treasuries, with effect from , the strong room of the State Huzur Treasury, Bangalore was transferred to the control of the Superintendent of Stamps and the Superintendent of Stamps has sine been holding the stock of blank forms in is safe custody. He furnished monthly a plus and minus memo of the forms to the Accounts and Entitlement Office. The following accounts and returns are received from the treasuries. Monthly: (a) Copies of the Subsidiary Registers of Issue of duplicate Fixed Deposit Receipts. (b) Copies of the Subsidiary Register of Payments. Annually: (c) Annual Accounts. The account referred to at (b) above will be received by the District accountant with the monthly accounts. It will, after agreement with the Treasury Account of Receipts and Payments, as regards repayment of Principal and payment of Interest, be transferred to Savings Bank Section. Manual of Savings Bank Account Page No. 13

19 Chapter V 5.02 Subsidiary Registers of Receipts & Payments: Fixed Deposit Receipts The monthly schedules are examined to see that the totals of individual items are correct, that all connected challans or vouchers have accompanied the schedules. The schedules will be carefully filed and kept in safe custody of the Section Officer as they constitute important records. At the end of the year the schedules of each district should be bund and preserved carefully Transfers: The entries in the Subsidiary Register of Receipts (transfer column) will be compared with those in the Subsidiary Register of Payments (transfer column) and the word Responded should be noted in the Subsidiary Register of Payments against each item, the details of transfer to other treasuries as per Subsidiary Register of Payments will be posted in the Original Receipt Register in the appropriate columns under the initials of the Section Officer. An Abstract of transfers will be prepared each month in the following form. April and so on for 12 months. No. Name of the District 1. S.H.Treasury 2. Kolar 3. Tumkur 4. Shimoga 5. Chickmagalur 6. Mysore 7. Chitradurga 8. Hassan 9. Mandya Total Transfers to other treasuries Rs. Transfers from other treasuries Rs. Closing Balance Rs. Manual of Savings Bank Account Page No. 14

20 Chapter V Fixed Deposit Receipts Note: The Fixed Deposits Scheme has not been extended to the integrated districts consequent on the Reorganisation of States and to Bellary District. The total for the State should agree. A statement of differences should be prepared and their adjustment watched. A report on the progress made should be submitted to the Gazetted Officer in charge once a month. This register is of special importance to see that spurious entries are not made in Receipt Registers. At the foot of the Receipt and Payment Registers of each district, a plus and minus memo will be worked out by the Accountant and agreed with Transfer Register. This abstract should be reviewed by the Gazetted Officer every month Broadsheet of Fixed Deposits: A Broadsheet in Form No. MSO (T) 129 will be maintained for cash transactions. This will be posted from the subsidiary register of Receipts and Payments. (Cash column and agreed with Detail Book every month). After posting the transactions for March, a statement of unpaid deposits (by treasuries) will be prepared by Savings Bank Section with reference to the entries in the Subsidiary Register of Receipts and the total of this statement should agree with the Broadsheet Balance Check of Annual Accounts: The Annual Accounts received from treasuries should be checked as follows: (i) The monthly receipts and repayments should be checked with the totals of the Subsidiary Registers received from treasuries. (ii) The figures of the consolidated account should be checked with the figures of the detailed account and compared with the total figures of the Broadsheet and Abstract of Transfers. The total closing balance should agree with the Broadsheet and the ledger balance. (iii) The detailed statements of Deposits received from treasuries will then be compared with statements independently prepared by the Savings Bank Section. (Vide also para 24) Manual of Savings Bank Account Page No. 15

21 Chapter V Fixed Deposit Receipts 5.06 Interest due on Fixed Deposit standing in the name of Minor: Transfers of Fixed Deposits from one person to another or to the names of certain recognised Banks, and from one Treasury to another will be regulated in accordance with the instructions contained in Appendix III. All cases of transfer with necessary particulars will be intimated by the District Treasuries in a consolidated statement in the Form No. SB 17 of S.B. Rules 1959 including the transfers effected by the Taluk Treasuries along with the monthly accounts. These transfers will be noted in the receipt registers of this office Fixed Deposit Receipts pledged as Security to a Recognised Bank: In the case of a Fixed Deposit Receipt pledged as security to a recognised Bank, repayment of Principal or payment of Interest thereon may be made to the pledgee, i.e., Bank without insisting on the discharge on the receipt of the original holder. Manual of Savings Bank Account Page No. 16

22 Chapter VI CHAPTER VI Savings Certificates SAVINGS CERTIFICATES 6.01 Receipt and check of accounts received from the Treasury: The issue of new Savings Certificates has been stopped with effect from as per G.O. No. FL (B) and dated All blank forms of the Savings Certificates held in the treasuries were destroyed thereafter, except 100 blank forms of each of the denominations which were required to be kept in the custody of the Officer-in-charge of the State Huzur Treasury, Bangalore, for issue of duplicate certificates in lieu of original certificates lost or destroyed. Consequent to the transfer of Stamp work of the Superintendent of Stamps to the Department of Treasuries, with effect from the strong room of the State Huzur Treasury, Bangalore was transferred to the control of the Superintendent of Stamps and the Superintendent of Stamps, Bangalore, has since been holding the stock of blank forms in his safe custody. He furnishes monthly a plus and minus memo of stock of the Certificates in Form SC 10 to the Accounts and Entitlement Office on the 10 th of every month Receipt of Accounts from the Treasury: Under instructions 12 and 17 of the Instructions for the guidance of Treasuries, each District Treasury sends to this Office: a) Monthly journals of Savings Certificates issued (sold and delivered to investors) Form SC 6. b) Monthly journals of Savings Certificates discharged (paid) in Form SC 7. c) Monthly summaries of Savings Certificates issued and discharged from the District Treasury. (Instructions 29 of Savings Certificates Instructions for the Guidance of Treasuries). Manual of Savings Bank Account Page No. 17

23 Chapter VI (i) (ii) Savings Certificates Each District Treasury will prepare from the information contained in the Abstract of Taluk Treasury, monthly lists of certificates discharged by the District Treasury itself and the Taluk Treasuries under its control. The summaries will be despatched to the A&E Office along with the Schedules. (Instructions 29) If there is no issue or discharge in the District Treasury during a month blank monthly list for that treasury need not accompany the District Treasury monthly Abstract. The monthly summary should however, be submitted to this office even if there be no transactions at the District Treasury or any Taluk Treasury under it during a month. d) A plus and minus memo of stock of the certificates in Form No. SC 10 should be sent to the A&E Office on the 10 th of every month (Vide Instructions 29(3)) e) Yearly lists of unsold Certificates on or before the 15 th April as detailed in Instruction Verification of Savings Certificates figures with Treasury Account of Receipts and Disbursements: The totals of the monthly summary will be agreed with the monthly treasury account of receipts and disbursements and a certificate to that effect recorded on the journal before they are transmitted to the Savings Bank Section from the Central Treasury Section Examination of Summaries: The summaries received with the monthly schedules should be carefully checked by the Accountant and after check, the receipts and payments of principal posted into the Broadsheet of Savings Certificates. Check of repayments of Savings Certificates originally delivered to investors. The journal of discharges (Form SC 7) will be examined by the Accountant to see: (i) That all the particulars in the form are given. Manual of Savings Bank Account Page No. 18

24 Chapter VI Savings Certificates (ii) That each entry in the journal is supported by a discharged Savings Certificate and that serial number shown in column 1 of the journal is noted in the voucher Half Margin Memoranda: The following defects and irregularities will be entered in the half margin memoranda which will be returned in original by the Treasury Officer with his reply: 1) Sl. No. of Savings Certificate not entered in monthly journal of Certificates issued and delivered. 2) Sl. No. of Savings Certificates not entered in journal and Certificates discharged (repaid) 3) Miscellaneous irregularities: (a) Discrepancies in any of the particulars of the paid journals and those of the discharged Savings Certificates. (b) Entry numbers in any of the journals not continuous. (c) Use of unauthorised forms. (d) Delay in submission of returns. (e) Discrepancies and irregularities in connection with monthly summaries and abstracts. 41. After posting the transactions for March, a statement of unpaid certificates (by treasuries) will be prepared by Savings Bank Section with reference to the entries in the Subsidiary Register of Receipts and the total of this statement should agree with the Broadsheet balance. Manual of Savings Bank Account Page No. 19

25 Chapter VII Guarantee given by the State Government for Loans raised by Local Bodies, Quasi Government Institutions CHAPTER VII GUARANTEE GIVEN BY THE STATE GOVERNMENT FOR LOANS RAISED BY LOCAL BODIES, QUASI GOVERNMENT INSTITUTIONS 7.01 General: Guaranteeing is an integral part of State borrowing as could be inferred from the provisions contained in Art.293 (1) of the Constitution of India. The State Government gives guarantees for the repayment of loans, together with interest, raised by the Local Bodies, Quasi-Judicial Institutions, Co-operative Institutions etc. from Financial Institutions as per terms imposed by them. The procedure to be adopted by the Administrative Departments of Government and Heads of Departments has been laid down in Government OM No. FD 24 RLG 63 dated and OM No. FD 95 RLG 68 dated The cases of guarantees given by the State Government other than those pertaining to loans raised by public bodies and institutions engaged in industrial undertakings are dealt with in Savings Bank Section Register of Guarantees: A register of guarantees should be maintained in form given in Annexure III, and particulars posted from sanction orders received from Audit Office after scrutiny. (Vide paras 478 to 479 of M.S.O (T)) Heads of Departments are required to watch guarantees and recovery of guarantee commission etc., in proforma A&B referred to in para 6 of OM No. FD 95 RLG dated (reproduced as Appendix I) and furnish information to this office. Postings in the register are made from the particulars received from the Heads of Departments as also the concerned institution. The register is closed and submitted to the Branch Officer on 10 th of every month. Annually, Savings Bank Section has to furnish material for compilation of Finance Accounts of the State and send it to AAD Section. Manual of Savings Bank Account Page No. 20

26 Chapter VII Guarantee given by the State Government for Loans raised by Local Bodies, Quasi Government Institutions PROFORMA A (Para 6 of Government Order dated ) Proforma for watching receipt of Guarantee Commission as at the end of Sl. No. G.O. No. & date in which Guarantee was sanctioned Name of the institution Firm/Individual on whose behalf guarantee is given Amount of guarantee 1 2 Amount drawn against the 3 Repayment 4 guarantee Date Amount Date Amount Balance sum guaranteed outstanding as on 31 st 20 Commission due since the drawal of loan to the end of 31 st 20 Principal Interest Period for which reced Commission received by Government to end of 31 st. 20 Amount Name of the Treasury Challand Balance of guarantee commission due Action taken for recovery Remarks PROFORMA B (Para 6-ii of G.O. dated ) Statement showing the guarantee given by the Government of Karnataka in respect of loans raised by Local Bodies and other Institutions as on Sl. Name of the Name of the Authority for Nature and Rate of No. Department giving Public Body in giving extent of Interest if the guarantee whose favour guarantee and guarantee any Manual of Savings Bank Account Page No. 21

27 Chapter VII Guarantee given by the State Government for Loans raised by Local Bodies, Quasi Government Institutions guarantee is No. and date of given sanction Maximum amount guaranteed Amount of Loan/ interest guaranteed outstanding as on Whether any security is pledged to Government as a set off against guarantees Remarks whether guarantee utilised and amount drawn or not drawn Manual of Savings Bank Account Page No. 22

28 Appendix - I APPENDIX I GOVERNMENT OF MYSORE Finance Department O.M. No. FD 95 RLG 68, Dated 11 th November Guarantees given by Government for loans raised by Local Bodies, Quasi- Government Institutions and Joint Stock Companies etc. lays down the criteria and procedure for adoption by the Administrative Departments to safeguard the interest of Government in connection with - OFFICIAL MEMORANDUM No. FD 95 RLG 68, Bangalore, dated the 11 th November Guarantees by the State Government for the repayment of the loans together with interest, raised by the Local Bodies, Quasi Government Institutions, Joint Stock Companies or Industrial Undertakings, Co-operative Institutions etc., from the Financial Institutions as per the terms imposed by them, are an integral part of State borrowing as could be inferred from the provisions under Article 293 (1) of the Constitution of India. Accordingly, a procedure was laid down in this Department O.M. No. FD 74 RLG 63, dated 27 th April 1968 for adoption by the Administrative Departments of Governments and Heads of Departments. In order to further safeguard the interest of Government whenever guarantees are proposed to be given, it has been considered necessary to fix criteria for considering proposals for giving guarantees and also to revise the existing procedure prescribed in the above O.M. 2. Any proposal for guarantee by Government must be justified by public interest. Public interest cannot be precisely defined. However, the following may be considered to be an illustrative list.: (a) Borrowings by public sector institutions for approved developmental purposes eg. from foreign lending agencies and public sector financial institutions if so required by their charters and for banks or public in order to enable the institutions to borrow on Manual of Savings Bank Account Page No. 23

29 Appendix - I reasonable terms. (b) (c) (d) Borrowing by public sector undertakings from Banks for Working Capital purposes. Borrowings of non-public sector institutions if justified on broad policy and similar considerations from foreign lending agencies or public sector financial institutions by private concerns such as State Co-operative Banks, Co-operative Sugar Factories, Textile Mills and the like facing closure or other difficulties, which are to be supported, in pursuance of a public policy, and where the proposed loan is considered essential for enabling the company or institution to be rehabilitated and/ or begin to show profitable working. The loan must be justified on merits and the guarantee should not be a substitute for viability, which should be established independently of the availability of the guarantee or otherwise. Borrowings by individuals for development of cottage industries, etc. 3. The proposal for a guarantee, which amounts to undertaking a contingent liability, should be examined in the same manner as proposal for grant of a loan. This would mean that the proposal should be examined with reference to: (a) (b) (c) (d) The public interest which the guarantee will server. The credit-worthiness of the borrower in order to see whether any undue risk would be taken by giving the guarantees. The terms of borrowings in the case of market borrowings and negotiated loans from financial institutions to see that they are not out of line with those approved by the Reserve Bank of India. The conditions, if any, which should be made by Government while giving the guarantee, eg. period of guarantee, levy of guarantee commission to cover the risk representation for Government on the Board of Management, mortgage or lien on the assets, submission to Government of periodical reports and accounts, right to get the accounts audited on behalf of Government, etc. 4. The following procedure in addition to other safeguards prescribed if any, under the Manual of Savings Bank Account Page No. 24

30 Appendix - I rules or other authority of the Department, concerned is laid down for adoption by the Administrative Departments of Government and the Heads of Departments: (a) (b) (c) (d) (e) In the case of Industrial units or individuals, the guarantee should become operative only after the execution of mortgage deeds and agreements by the loanees. As regards industrial units, mortgage deeds should be on the assets of the firm. In the case of individuals, personal bond should be obtained from one or more sureties as may be deemed fit by the Administrative Departments on the merits of each case. Mortgage deeds and personal bonds, should be executed before the loan is drawn and copies of these documents should be sent to the Accountant General. The Government Order according sanction to stand guarantee should also provide for an agreement with the financing institutions to bring promptly to the notice of Government defaults by the principal debtor either in the payment of principal or of interest or both. An agreement with the principal debtors should also be entered into and the execution of such an agreement or indemnity bond should precede the execution of Guarantee Deeds. The agreement deed executed by principal debtor should cover interalia the terms of the guarantee mentioning the security offered by the principal debtor for the loan secured on Government Guarantee, the purpose(s) for which the loan secured has to be utilised by the principal debtor and a provision regarding right of Government to conduct the inspection of the records and account of the principal debtor. If the concerned Administrative Department is satisfied that there is a adequate safeguard even without an indemnity bond or agreement, that department in consultation with the Finance Department may under special circumstances exempt the loanee from the execution of the agreement deed or indemnity bond. Though Government have agreed to exempt the Central Co-operative Banks from the execution of indemnity bonds or bonds or agreements on certain funds pointed out by the Reserve Bank of India (Vide letter No. DPC 144 CLS 64, dated 17 th July, 1965) Manual of Savings Bank Account Page No. 25

31 Appendix - I in respect of loans raised by them on Government Guarantee, Government will consider the question of giving guarantee to the loan only on the basis of reports of financial credit worthiness to be furnished by the Registrar of Co-operative Societies in consultation with the Reserve Bank of India. In cases where exemption from the execution of indemnity bond is given, the same should invariably be mentioned in the Government Order according sanction to stand guarantee. (f) In the case of Central Co-operative Institutions which are exempted from the execution of agreement or indemnity bond, the Registrar of Co-operative Societies should review annually the financial position of these institutions. (g) (h) (i) In the Government Order according sanction to stand guarantee, a condition should be laid down that the loanee institution should create a sinking fund to which contributions should be made by the institution concerned periodically. The concerned Administrative Departments should also see before giving Government Guarantee that all institutions seeking Government Guarantee assess their requirement after taking into account the need for creation of sinking fund and working capital requirements instead of approaching Government piecemeal for assistance for different purposes viz., for purposes of acquiring assets, working capital requirements, repayment of matured loans, payment of interest on borrowings etc. It is desirable that these institutions make a thorough examination of their financial requirements they approach Government for guarantee. Institutions availing of the benefits of the Government guarantee should be required to send once a year complete information of assets and liabilities of the institutions to Government and to the Accountant General. This information should be sent by the 30 th September. The Reserve Bank of India should be consulted as to the terms in regard to rate of interest and other conditions subject to which the Local Body/ Quasi Government Institutions/ Co-operative Societies, Industries and others can be permitted to raise an open market loan or a loan to be secured on Government guarantees from institutions like Industrial Finance Corporation, State Financial Corporations and LIC. Cases of guarantees offered in favour of Commercial Banks or Co-operative Banks need not Manual of Savings Bank Account Page No. 26

32 Appendix - I be referred to Reserve Bank of India. (j) Institutions other than credit Co-operative Societies, Central Co-operative Land Mortgage Bank and such other bodies in respect of which Government are already committed under a statute to stand guarantee have to pay guarantee commission as per rates prescribed in Government Orders No. FD 32 RLG 69 dated 24 th July 1969 and 12 th September 1969 and as may be amended from time to time including the amendments under the provisions of the State Aid to Industries Act. (k) (l) (m) While executing the guarantee deed by the concerned Administrative Department as a guarantor, care should be taken to ensure that no provision is made in the guarantee deed permitting the concerned financial institutions to recover automatically the loan amount from Government in the event of failure on the part of the loanee institutions to repay the said loan amount on the due date. In such case, for discharge of the liability by Government as a guarantor, the Banks and other financial institutions should be required to present a bill at the Treasury duly countersigned by the head of the concerned department for recovery of the loan amount. For this purpose, the concerned financial institution should approach the concerned Administrative Department in the first instance for obtaining formal sanction of Government in the Finance Department and only thereafter a bill for the amount may be presented at the treasury for claiming the amount due. In cases where the State Government and the Central Government have given guarantee on 50:50 basis the concerned administrative department should ensure that the orders of Central Government standing guarantee to the extent of 50 percent of the loan amount are invariably obtained from the concerned Ministry of the Government of India and copies of the same are forwarded to the Accountant General and under intimation to Finance Department. The administrative departments should review annually the position of the guarantees under their administrative control at the close of each financial year and send a report review to the Finance Department not later than two months after the close of the year. Manual of Savings Bank Account Page No. 27

33 Appendix - I 5. The above procedure should be treated as ancillary to that indicated in the O.M. No. FD 101 RLG 62 dated 12 th February 1963, Some of the salient features of which are given below for ready references: (1) In the Government Orders according sanction to stand guarantee the currency of sanction should be specifically mentioned. Guarantees not availed of to the extent sanctioned, should either be withdrawn or cancelled within the year of sanction. The Department which is nominated to watch the payment of guarantee commission on due date, should advise Government in the Finance Department, the concerned Administrative Department and the Accountant General about the drawal of the loans from time to time to enable the Government to take note of the liability as the guarantor of the loan at any date. (2) The Departments of Government should see that the following points are covered in the order according sanction to stand guarantee. i) Nature and extent of guarantee. ii) Maximum amount guaranteed. iii) Terms of repayment of the loans raised iv) Rate of interest v) Whether the payment of interest is also guaranteed. vi) Rate of guarantee commission payable. The order giving guarantee should also mention that Guarantee Commission shall be calculated with reference to the actual balance of the principal and interest outstanding at the end of each month and shall be paid once in six months, the first payment commencing after six months from the date of drawal of the loan. In cases where the autonomous bodies and co-operatives Banks raise the loans/ debentures from the open market or from the LIC or other financial institutions against Government Guarantee and pay the interest on such loans debentures half yearly or once in a year, the interest on these loans cannot be considered as accruing month after month for the purpose of calculating the guarantee commission. In such cases, as incidence of interest Manual of Savings Bank Account Page No. 28

34 Appendix - I liability arises only at intervals of six months or once a year depending upon the mode of interest payment adopted by the loanee institutions, the guarantee commission is payable to Government by such institutions only on the amount of interest that would remain outstanding after it has accrued under the terms of the debentures issue and vii) Securities to be given for the loan guaranteed. (3) It is also necessary that a specific mention is made in the Government Order according sanction to stand guarantee, that the institution should not raise any further loan without the prior approval of the State Government. A specific clause to this effect should also be included in the agreement to be executed. (4) The Government order standing guarantee should also make provision for- a) Audit of annual accounts of the institution atleast once a year by an Auditor appointed by Government or by a Chartered Accountant. b) Submission to the Accountant General of an annual statement of accounts by 30 th September of following year duly certified by an Auditor containing inter alia following particulars for purpose of review: (5) (i) Full and complete statement of assets and liabilities; (ii) Valuation of these assets; (iii) A working or manufacturing account showing the out-turn by the industrial business or enterprise with those per unit off such out-turn and the profits or loss on the marketing of the products produced; and (iv) The accounts shall be open to test-check by the Comptroller and Auditor General at his discretion. (6) (i) The Government Order should also specify the Head of the Department who should watch the payment of Guarantee Commission on the due date and also to see that the other terms of the Guarantee are implemented by the borrowing institution or local body as the case may be. The Head of the Department held responsible for watching the payment of guarantee commission should maintain Manual of Savings Bank Account Page No. 29

35 Appendix - I the Register in the enclosed proforma A as prescribed in O.M. No. FD 15 RLG 68 dated 7 th November A list of Heads of Departments required to watch the payment of guarantee commission should also be made available to Accountant General as required in the above O.M. Copy of O.M. No. FD 101 RLG 62 dated 12 th February 1963 is also appended for information. (ii) A direction should also be given in the Government Order that Head of the Department should watch the guarantee position at the close of each financial year and send a report to Finance Department in the enclosed proforma B and this report should reach the Finance Department by 1 st May of each year. (7) The procedure laid down above is effective from the date of this Official Memorandum. The procedure referred to in O.M. No. FD 101 RLG 62 dated 12 th February 1963 should however be treated as effective from the date specified therein. The instructions contained in sub-paras (g) and (m) of para 4 of this Official Memorandum should be borne in mind even in respect of guarantee given in the past. (8) All the Administrative Departments and the Heads of Departments should follow strictly the revised procedure and also the criteria fixed for giving guarantee, as any deviation from the revised procedure may entail unnecessary correspondence with the Accountant General as a result of omission to incorporate specific terms and conditions of guarantee in Government Orders. Manual of Savings Bank Account Page No. 30