Departments to Conduct Review of Govt Guarantees

The Ministry of Finance has asked all the departments to undertake a review of government guarantees given by respective ministries to their Central Public Sector Enterprises (CPSEs) or entities.

Review of Government Guarantees

• The review will look into aspects like whether the discharge of repayment obligations or interest obligations as per terms of the loan agreement and covenants and conditions met.
• Further, the details of CPSEs or entities on due guarantee fee paid on time to the government should also be submitted.

Why there is a review of Government Guarantees?

• Guarantees are contingent liabilities which have the potential to impact the financial performance of the government.
• Further, the FRBM Rules stipulates that the government cannot guarantee more than 0.5 per cent of the GDP of the respective financial year to CPSE/entities.

Hence the Ministry of Finance has requested all ministries and departments to prioritised guarantee requirement for 2019-20 to include only such proposals where the loan agreement can be signed and guarantee agreement can be executed during the year.