Roll and Function of Various Stake Holders

towards External AssistanceAnd

Fund Flow Mechanism

Govt. of India - Ministry of Finance

Department of Economic Affairs

Department of Revenue

Department of Expenditure

Multilateral Institutions Division

Bilateral CooperationDivision

Budget Division

Multilateral RelationsDivision

AAA&D Division

Department of Financial Services

Economics Division Infra & InvestmentDivision

Divisions under DEA

FUNCTIONS of AA&AD1. External Aid Accounting

2. Disbursements

3. Debt Servicing

4. Coordinating with Project Implementing Agency, Donor, Bank etc.

5. Budget for External Aid Receipts & Payment

6. Maintaining External Aid Statistics Debt Statistics and other Reports

in computer system for management.

Aid Accounts &

Audit Division

Role of BorrowerMinistry of Finance (DEA)

(Multilateral Institutions and Bilateral Cooperation Divisions)

Facilitates Appraisal Processing and Negotiations Signing of Agreements Causing agreements to take effect Follow up of project implementation and monitoring Coordinating mid-term review and completion report to

donor All other actions relating to Agreements viz. Amendments,

Reallocation, etc.

Role of Project Implementing Authority Helps in project appraisal Signing project agreement Ensuring proper procurement procedures acceptable to donor Responsible for all project activities and sending periodical reports

to donor Maintaining proper accounting records based on sound financial

management Responsible for preparing reimbursement claims and sending the

same to Aid Accounts & Audit Division, New Delhi Ensuring timely audit of accounts and reports to donor by due date Prepare completion report of the project identifying further phase

of the project where donor can finance

Role of Aid Accounts & Audit Division(AA&AD) Authorized signatory to withdraw funds from the loan accounts from the

Donor Responsible for maintaining special account for advance deposit received

from the Donor and ensuring submission of audit certificate to the Donor Arranges periodical payment to Donor of all loan charges and principal

repayment by due date Supplies disbursement details to PF-I, Department of Expenditure for release of

Additional Central Assistance to State Governments. Maintaining Sovereign Debt Statistics and reconciling the same periodically with

Donor. Rendering Periodical Accounts to C.G.A. for incorporation in the Union Finance

Account. Publication of Annual External Assistance Brochure.

Role of RBI towards External Aid Repository of all Foreign Currencies Inflows INR equivalent of Foreign Currency Flow from

External Aid is passed on to the Credit of CAA&A Maintenance of Loan-wise Special Account in disbursed

currency for the advance/deposits received from Donors.

Coordinating with CAA&A for sending External Debt data to Donor and other institutions.

Providing Exchange Rate for Government transactions of major Foreign Currencies to AAAD on daily basis

Role of Commercial Bank towards External Aid

S.B.I., B.O.B., Canara Bank, BOI, UBI and PNB are designated banks.

Responsible for remitting foreign currencies to the donors towards repayment of principal and interest payment and other charges on due dates

Coordinates with CAA&A and RBI in discharge of their functions.

Multilateral Agreement

Agreement with an institution or bank whose capital is subscribed by two or more countries / institutions / banks to finance in different (multi) currencies equivalent to loan currency e.g. agreement with International Financial Institutions like World Bank, Asian Development Bank etc.

Bilateral Agreement

Agreement between two sovereign government Financing can either be in the currency of the donor or

different currency equivalent of loan designated in donor currency

Foreign Expenditure

Expenditure in the currency other than the currency of the borrower

Local Expenditure

Expenditure in the currency of the borrower

PROJECT CYCLE

Negotiations (Donor & Govt.)

Appraisal By Donor

Proposal To Donor

Identification By Govt.

Evaluation By Donor

Project Completion Completion Report

Declaring The Agreement Effective

Project Execution

Financial Agreement Donor /GOI & Project Agreement Donor/

Project State

Disbursement Flow ChartProject Implementing Agency

AA&A Div.Reimbursement Claims Under

Revolving Fund ProcedureReimbursement Claims Not Under Revolving Fund And All Direct Payment ClaimsR.B.I. Mumbai

AA&A Div.Donor office in India

Donor Head Quarters

Reimbursement Claims

C.A.A.&A’s Account at RBI, New Delhi Through RBI Bombay

Direct Payment

Payees Account

Advise AA&A Div.

Claims

Advice

Statement

For Expenditure Budgeted at S.R. of F.C. by P.I.A

Credit CAA&A’s Account

S.R : Selling Rate of RBI.F.C. : Foreign CurrencyP.I.A. : Project Implementing AgencyD.R. : Daily RateD.O.E. : Department Of ExpenditureP.F. Div. : Plan Finance DivisionC.A.S. : Central Accounts Section

ClaimsAA&A Div.

Donor through local office

Payee’s Account Advise AA&A Div.

Rs. at Selling RatePMU Div. D.E.A

P.F. Division at D.O.E.

R.B.I. C.A.S. Nagpur.

Cr/Dr. State Govt.Account

ExpenditureIncurred

Interest.

Fund Flow Chart Direct Payment Procedure

Fund Flow Chart- Reimbursement Procedure

Expenditure Budget of P.I.A.

Claims

A.A.& A Div.

For Claims Under Revolving Fund For Claims Outside Revolving Fund

Donor RBI Mumbai

A.A.& A. Div.

Statement

Disbursement to CAA&A Account

P.F. Div. of D.O.E

PAO Expenditure RBI, C.A.S. Nagpur

State Govt. Account- Credit

P.I.A. : Project Implementing AgencyP.F. : Plan FinanceD.O.E. : Department of ExpenditureC.A.S. : Central Accounts Section

Through Loacl office

Back to Back Loans

12th Finance Commission recommended that External Assistance may be passed on to states on the same terms and conditions, on which the loans/grants are received by GOI.

Government of India has accepted this recommendation. All External aid agreements for State Projects except for

Special Category States w.e.f. 1st April 2005 are now on Back to Back basis. However there is no change in upfront payment to donor by AAAD and for release of ACA by PF-I.