CAG comes down heavily on banks for lapses, falsification in loan waiver

Gives detailed report RBI tells banks to fix responsibility in a month, file FIRs if needed

P Chidambaram’s populist debt waiver to farmers in the 2008 Budget has returned to haunt him in his second term as finance minister in the UPA government.

Ineligible farmer accounts with instances such as tampering, over-writing and disproportionate benefits have been detected by the Comptroller and Auditor General (CAG), the Reserve Bank said today. The entire package, meant to support small and marginal farmers, cost the exchequer about Rs 60,000 crore.

The CAG is conducting a performance audit of the Agricultural Debt Waiver and Debt Relief Scheme (ADWDRS), 2008. The CAG explained its observations at a conference on December 7, 2012.

Keeping these in mind, the government has asked banks to take corrective steps. The information about cases examined by CAG and its observations are already with the banks. RBI has asked banks to take action on the issues raised by CAG within a month and update it on the progress.

Besides instances of tampering and over-writing, there was inadequate documentation in some cases, to provide benefits to ineligible farmers. RBI has said banks must fix responsibility on officials and begin recovery from ineligible beneficiaries. In cases of tampering, a police complaint must be filed.

The scheme was meant to extend direct benefits to eligible farmers but in some cases, loans extended to micro finance institutions were claimed and disbursed. Banks must recover such money, RBI has said.

RBI DIKTAT The central bank has asked banks to correct lapses in farm debt scheme
Observations	Steps advised
Ineligible farmers got benefits by manipulation of documents	Recover the money from accounts Fix responsibilities of officials and auditors Lodge FIRs where records were tampered
MFIs got benefit though scheme was meant only for the farmers	Fix responsibility on officials Recover the money
Disproportionate benefits granted to farmers	Recover the money Fix responsibility on officials, auditors
Inadmissible charges reimbursed to banks	Recover the money Fix the responsibility on claimant unit
Debt waiver and relief certificates not issued	Issue certificates by February 28
Outcome of fresh loans not monitored	Monitoring of such accounts
Source: Reserve Bank of India

In the case of some eligible farmers, the benefits were disproportionate. Banks also claimed inadmissible charges.

Banks have been told to fix responsibility on the officials who disbursed the money and the auditors, too. Where charges were inadmissible, responsibility should be fixed on claimant institutions and officials who disbursed the amounts.

CAG also came across instances where certificates were not issued to farmers. Also, where banks failed to monitor the outcome of fresh loans given to farmers, RBI said. Banks must immediately issue certificates to farmers who did not get these and the process be completed by February 28.

Bank had given fresh loans to some farmers who took benefits of the waiver and relief but did not monitor the outcomes. Banks must immediately commence monitoring of such accounts for outcomes, RBI said.