CAG starts auditing farm loan waiver scheme

CAG starts auditing farm loan waiver scheme

The Comptroller and Auditor General of India (CAG), the government’s external auditor, has started reviewing a Rs65,318 crore loan waiver offered by the United Progressive Alliance (UPA) government to farmers in 2008.

As part of the audit, CAG, which audits central and state government books and looks into the efficiency of government programmes, will also audit the books of banks for the first time, comptroller and auditor general Vinod Rai said.

Until now, only the Reserve Bank of India (RBI) and chartered accountants have looked into the books of Indian banks, Rai said on Tuesday, on the sidelines of the 60th anniversary celebrations of the National Academy of Audit and Accounts in Shimla.

The loan waiver was India’s largest-ever single-shot income transfer scheme, estimated to have helped some 36 million farmers nationwide.

It included a full waiver of outstanding loans for small farmers—who cultivate up to 2 ha —while medium and large farmers got a quarter of their outstanding loans waived on an agreement to pay the rest. The scheme was seen as a contributing factor in the UPA’s re-election a year later.

CAG is hoping to finish the report in a year. It has already written to the government for access to the accounts of banks that administered the waiver, another CAG official said on condition of anonymity.

“We wrote to the government, and the government wrote to Nabard (National Bank for Agriculture and Rural Development) and RBI," said the official.

“RBI has to issue instructions to banks," he added. “Our audit is restricted to the implementation of the scheme and whether the transactions took place correctly."