Rajasthan Financial rapped over loan recovery

The Comptroller and Auditor General of India (CAG) has rapped Rajasthan Financial Corporation (RFC) for low loan recovery.

The CAG, in its audit report, has said that overall recovery performance of RFC, a state finance corporation, was abysmally low. It could recover only 5.60 per cent to 7.63 per cent of old dues and 33.92 to 58.35 per cent of current dues in the last five years up to 2004-05.

"Of the total loans of Rs 2,399.47 crore, disbursed up to 2004-05, Rs 1,457.08 crore were outstanding at the end of March 2005. More than 72 per cent of overdues were more than two years old, indicating poor recovery efforts," the CAG said.

The report said the targets for recovery were progressively reduced from 25.61 per cent of total overdues in 2000-01 to 19.38 in 2004-05.

The corporation failed to achieve even those modest targets and recovery remained between 67.68 to 92.22 per cent of the target.

The percentage of non-performing assets (NPA) ranged between 40.33 and 50.95 per cent during 2000-05. Doubtful and loss assets as a percentage of NPA increased from 76.51 per cent to 87.38 per cent during the five years under review.

Of 611 loans sanctioned during 2001-02, 71 loan accounts became NPA within a short span of two years and out of 628 loans sanctioned during 2002-03, 37 loan accounts became NPA within one year.

Against the target of reduction of NPA to less than 10 per cent, the reduction was only 40.33 per cent at the end of March 2005.

Lack of internal control over project appraisals and non-adherence to the policy resulted in the corporation's failure to recover Rs 11.95 crore owing to sanction of loans to unviable units. Risk management by the corporation was deficient, the CAG report noted.

RFC suffered losses amounting to Rs 97.03 crore due to delayed action, non-identification of properties and guarantors and imprudent settlement of dues.