The Rural Development Ministry, headed by Jairam Ramesh, took the decision after it was found that the functioning of CAPART, formed in 1986, was not transparent and majority of the voluntary organisations funded by it failed to deliver properly, sources said.
CAPART registered under the Societies Registration Act 1860, was once claimed to be a major promoter of rural development in the country, assisting over 12,000 voluntary organisations in implementing a wide range of development initiatives.
The sources said activities of CAPART were under scanner for mismanagement and doling out money to non-existing NGOs.
Nearly 1000 NGOs have allegedly looted the wealth of CAPART and some of them have been blacklisted.
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There are cases of fraud also in various police stations across the country, sources said.
The Rural Development Ministry's decision also followed the Union Cabinet's decision last week to set up Bharat Rural Livelihoods Foundation (BRLF), an independent registered society for charitable purposes that would work towards facilitating civil society action in collaboration with Government, the sources said.