"Government is introducing a modified system of Government Observer with an enlarged role, which will include close monitoring of talent identification process and selection of the national team," Ministry said in a release.
"Under this expanded role, the Government will appoint the most reputed sportspersons who have retired from active sports, to function as National Observer for identified high priority and priority sports."
Sports Ministry clarified that they had no role in the alleged fraud.
"A news report regarding alleged misuse of official position by a few office bearers of Badminton Association of India and Delhi Capital Badminton Association to send their own relatives under a Youth-Sports Exchange Programme funded by Government of Japan in 2014 has come to our notice," the release said.
"The Ministry has brought out comprehensive guidelines for selection of the national team, which includes notification of the selection criteria by the NSFs well in advance. While considering each proposal for participation of the national team in any international event, the composition of the national team and the selection criteria is carefully reviewed by Sports Authority of India," it said.