Loan Waiver Proved As Great Bank Scam

Rs 52,000 cr farm loan waiver scheme a big financial scandal?
From Economic times

NEW DELHI: The UPA-1's Rs 52,000 crore farm loan waiver scheme is turning out to be a big financial scandal. Out of 1 lakh farm loan waiver accounts audited in 700 bank branches across the country — involving disbursement of Rs 500 crore — about 30% of the waiver amount was allegedly found to have been siphoned off by a nexus of bank managers and microfinance institutions (MFIs). 

A comptroller and auditor general (CAG) inquiry into nearly 1 lakh accounts revealed that more than Rs 150 crore was paid to half a dozen MFIs. These MFIs have provided no relevant records to the banks if the benefits have actually gone to deserving farmers. The auditor has also raised objection to the payouts made to MFIs as it was against the mandate of the scheme, which was meant for small and marginal farmers. The disbursement was to be made directly by the banks to eligible farmers. 

TOI had reported on January 17 that the RBI had asked all banks responsible for implementation of the waiver scheme to register FIRs against bank officials and MFIs who fraudulently drew part of the benefit meant only for individual farmers. 

As per the direction of the finance ministry and the RBI, banks have started recovery of such fraudulent payments, starting with the accounts that have been scrutinized by the CAG. The government may consider enlarging the scope of the audit, given that the CAG has pointed out irregularities in more than 25% of the accounts. 

The opposition BJP and Left have demanded that the CAG report on farm loan waiver be tabled in the Budget session of Parliament and sought investigation of all disbursements under the scheme. 

The scrutiny was part of CAG's performance audit on the farm loan waiver scheme of 2008-09. Sources said close to half a dozen MFIs have been caught in the act of colluding with senior bank officials to claim part of the disbursement. When bank officials were asked to produce documents against which they gave money to MFIs, no authentic accounts were produced. 

As per government records, loans of more than 3.2 crore farmers were waived till 2008-09, thus making them eligible for avail fresh agricultural loans. This would have also helped the banks de-clog their credit disbursement system. 

Though the full waiver of loans was meant for farmers possessing less than two hectares of land, the report revealed that the beneficiaries of the scheme constituted many big farmers with large land holdings. Many of the bank branches have been accused of overlooking deserving farmers having accounts in their bank who were denied benefits of the scheme. 

After a directive from the finance ministry, the RBI issued a notice to chairmen and CEOs of government banks to register FIRs against bank officials who tampered with records. The directive also asked these banks to complete the recovery of such fraudulent disbursements within a month.

http://economictimes.indiatimes.com/news/economy/finance/rs-52000-cr-farm-loan-waiver-scheme-a-big-financial-scandal/articleshow/18375315.cms