The CAG holds the Department of Financial Services in the finance ministry responsible for not taking action, in spite of, it alleges, "being aware of numerous flaws in the scheme". Of course, the errors were committed by the public sector banks responsible, which the CAG does not audit, and the nodal authorities meant to handle the monitoring of the banks were the Reserve Bank of India and the agricultural development bank Nabard, over which the CAG has no direct authority. It holds the RBI responsible for accepting the banks' claims without independent verification, and the Department of Financial Services for accepting the nodal agencies' claims, even though there were holes in them. Both the government and the RBI have been forced to respond. The prime minister said in Parliament that the Public Accounts Committee of Parliament should deliberate on the CAG's report - which he pointed out is the normal process - and the government would take "stringent" action against "defaulters". Perhaps, however, the government should not wait, and emulate the RBI's belated swing into action. The central bank said on Thursday that it was the personal responsibility of the heads of banks to recover the money extended to ineligible accounts. After all, if some bank officers used the scheme to cover up bad agricultural loans, the banks should be able to crack down on offenders.
There are two further points of interest. The first is that this demonstrates the danger of transfer systems, even through bank accounts, when they are not accompanied by proper monitoring all down the line. It is clear that a cash transfer system to replace government benefits in kind is not a panacea for all the ills of India's fragile and overextended welfare state. But the report's numbers are also worth noting. It said 8.5 per cent of the accounts checked were inappropriately granted access. Perhaps the leakage arising out of irregular transfers under the farm debt waiver scheme is significantly lower than gaps found in similar government initiatives earlier, because these benefits were routed through banks. So for the UPA government, the lesson to be drawn from the CAG audit is how it can speed up an effective roll-out of the Aadhaar scheme to plug leakages in implementing such a benefits transfer programme.
You’ve reached your limit of 5 free articles this month.
Subscribe now for unlimited access.
Already subscribed? Log in
Subscribe to read the full story →
Smart Quarterly
₹900
3 Months
₹300/Month
Smart Essential
₹2,700
1 Year
₹225/Month
Super Saver
₹3,900
2 Years
₹162/Month
Renews automatically, cancel anytime
Here’s what’s included in our digital subscription plans
Access to Exclusive Premium Stories
Over 30 subscriber-only stories daily, handpicked by our editors


Complimentary Access to The New York Times
News, Games, Cooking, Audio, Wirecutter & The Athletic
Business Standard Epaper
Digital replica of our daily newspaper — with options to read, save, and share


Curated Newsletters
Insights on markets, finance, politics, tech, and more delivered to your inbox
Market Analysis & Investment Insights
In-depth market analysis & insights with access to The Smart Investor


Archives
Repository of articles and publications dating back to 1997
Ad-free Reading
Uninterrupted reading experience with no advertisements


Seamless Access Across All Devices
Access Business Standard across devices — mobile, tablet, or PC, via web or app