Central Civil Services (Conduct) Rules, 1964

Rule 16: Investment, Lending and Borrowing

Rule 16 of the Central Civil Services (Conduct) Rules, 1964 regulates speculation, investments that may create a conflict with official duties, and certain lending, borrowing and financial obligations of Central Government servants.

In brief: A Government servant must not speculate in stocks, shares or other investments. Occasional investment through duly authorised and licensed intermediaries is not barred, but frequent buying or selling is treated as speculation. Investments that may embarrass or influence the Government servant in the discharge of official duties are also prohibited.

Text of Rule 16 - Investment, lending and borrowing

(1) No Government servant shall speculate in any stock, share or other investment:

Provided that nothing in this sub-rule shall apply to occasional investments made through stock brokers or other persons duly authorised and licensed or who have obtained a certificate of registration under the relevant law.

Explanation. Frequent purchase or sale or both, of shares, securities or other investments shall be deemed to be speculation within the meaning of this sub-rule.

(2) No Government servant shall make, or permit any member of his family or any person acting on his behalf to make, any investment which is likely to embarrass or influence him in the discharge of his official duties. For this purpose, any purchase of shares out of the quotas reserved for Directors of Companies or their friends and associates shall be deemed to be an investment which is likely to embarrass the Government servant.

(3) If any question arises whether any transaction is of the nature referred to in sub-rule (1) or sub-rule (2), the decision of the Government thereon shall be final.

(4)(i) No Government servant shall, save in the ordinary course of business with a bank or a public limited company, either himself or through any member of his family or any other person acting on his behalf:

(a) lend or borrow or deposit money, as a principal or an agent, to, or from or with, any person or firm or private limited company within the local limits of his authority or with whom he is likely to have official dealings or otherwise place himself under any pecuniary obligation to such person or firm or private limited company; or

(b) lend money to any person at interest or in a manner whereby return in money or in kind is charged or paid:

Provided that a Government servant may give to, or accept from, a relative or a personal friend a purely temporary loan of a small amount free of interest, or operate credit account with a bona fide tradesman or make an advance of pay to his private employee:

Provided further that nothing in this sub-rule shall apply in respect of any transaction entered into by a Government servant with the previous sanction of the Government.

(4)(ii) When a Government servant is appointed or transferred to a post of such nature as would involve him in the breach of any of the provisions of sub-rule (2) or sub-rule (4), he shall forthwith report the circumstances to the prescribed authority and shall thereafter act in accordance with such order as may be made by such authority.

Meaning and practical effect of Rule 16

Rule 16 distinguishes an occasional investment from speculation. An occasional investment made through a duly authorised and licensed broker or other registered intermediary is not prohibited merely because it concerns shares or securities. However, frequent purchase or sale, or both, is expressly deemed to be speculation for the purpose of sub-rule (1).

The rule also addresses conflict of interest. Even an investment that is not speculative may be prohibited if it is likely to embarrass or influence the Government servant in the discharge of official duties. The restriction extends to investments made by a family member or another person acting on the Government servant's behalf.

Speculation in stocks, shares or other investments is prohibited.
Occasional investment through duly authorised and licensed or registered intermediaries is permitted by the proviso to sub-rule (1).
Frequent purchase or sale of investments is deemed to be speculation.
An investment likely to influence or embarrass a Government servant in official work is prohibited.
If the character of a transaction under sub-rule (1) or (2) is disputed, the Government's decision is final under sub-rule (3).

Lending and borrowing restrictions under Rule 16(4)

Rule 16(4) generally prevents a Government servant from entering into certain financial arrangements with persons, firms or private limited companies within the local limits of his authority or with persons with whom he is likely to have official dealings. The purpose is to avoid financial dependence or pecuniary obligations that may affect, or appear to affect, impartial official conduct.

Ordinary banking transactions and transactions in the ordinary course of business with a public limited company are expressly kept outside the general prohibition. The rule also permits a purely temporary, small and interest-free loan to or from a relative or personal friend, a credit account with a bona fide tradesman, and an advance of pay to a private employee. A transaction may also be entered into with the previous sanction of the Government.

Where appointment or transfer to a post itself creates a situation that would breach sub-rule (2) or sub-rule (4), the Government servant must report the circumstances immediately to the prescribed authority and follow the authority's directions.

Official resources and related rules

For the latest consolidated text and amendments, refer to the Department of Personnel and Training - Acts and Rules and the DoPT Gazette Notifications. The Institute of Secretariat Training and Management also provides an official overview of the CCS (Conduct) Rules, 1964.

This page is an informational presentation of Rule 16 and related administrative instructions. Where a current official notification or amendment applies, the official Government text should prevail.