Section 11 of The Rehabilitation Finance Administration Act, 1948
1 [(1) The Central Government may from time to time advance money to the Administration for its business, the aggregate amount of which, —
- (a)for the purpose of enabling the Administration to advance loans, shall not, save as hereinafter provided, exceed twelve crores and fifty lakhs of rupees; and
- (b)for the purpose of enabling the Administration to meet any liability which it may incur in guaranteeing losses in respect of loans advanced by scheduled banks, shall not exceed two crores of rupees: Provided that if, after the lapse of such period from the commencement of this Act as the Central Government may think fit to fix in this behalf, any sum of money earmarked for the purpose specified in clause (b) is found not to have been actually advanced for that purpose and is not, in the opinion of the Central Government, likely to be required for the said purpose, the Central Government may utilize the money for making advances from time to time to the Administration for the purposes specified in clause (a), and when any such advance is made, the limit specified in clause (a) shall be deemed to have been correspondingly increased.]
- (2)2 [Subject to any regulations that may be made in this behalf, all moneys belonging to the Administration which are not immediately required by the Administration for any purpose] shall be deposited in the Reserve Bank of India or any agents thereof or invested in such securities as may be approved by the Central Government.
- (3)The Administration shall pay interest on the money so advanced at the rate of 3 per cent. per annum to the Central Government.
Summary
- The Central Government advances money to the Administration to run its business.
- Up to twelve crores and fifty lakhs of rupees can be advanced for making loans.
- Up to two crores of rupees can be advanced to cover losses guaranteed for scheduled banks.
- If the guarantee funds are not needed after a fixed period, the government can move that money to the loan fund instead.
- Unused money must be kept in the Reserve Bank of India, its agents, or invested in approved securities.
- The Administration pays the government 3 percent interest per year on all money advanced.
Practical examples
FAQ
1. How much money is available for advancing loans?
Normally up to twelve crores and fifty lakhs of rupees, but this limit can increase if unused guarantee funds are moved over.
2. What happens to money that the Administration does not need right away?
It must be deposited in the Reserve Bank of India, its agents, or invested in government-approved securities.
3. Does the Administration get this money for free?
No, it has to pay interest at the rate of 3 percent per year to the Central Government.
Test yourself
Q1.Under Section 11 of The Rehabilitation Finance Administration Act, 1948, what is the standard maximum amount the Central Government can advance for the purpose of advancing loans?
Q2.According to Section 11 of The Rehabilitation Finance Administration Act, 1948, what is the maximum amount earmarked for guaranteeing losses of scheduled banks?
Q3.Under Section 11 of The Rehabilitation Finance Administration Act, 1948, what interest rate must the Administration pay to the Central Government on advanced money?
Q4.According to Section 11 of The Rehabilitation Finance Administration Act, 1948, where must the Administration deposit money that is not immediately required?
Q5.Under Section 11 of The Rehabilitation Finance Administration Act, 1948, what happens if the Central Government finds the money earmarked for bank guarantees is not likely to be used?