Citizens' Issues
CAG finds discrepancies in Rs52,000 crore farm debt waiver scheme

The CAG has also found instances of tampering of records and criticised the Department of Financial Services in the finance ministry for deficient monitoring of the multi-crore scheme

Expressing serious concern over the implementation of Rs52,000 crore farm debt waiver scheme, the Comptroller and Auditor General of India (CAG) said in several cases ineligible farmers were given benefit while deserving ones were left out.


The CAG has also found instances of tampering of records and criticised the Department of Financial Services (DFS) in the finance ministry for deficient monitoring of the multi-crore scheme.


“Overall, the Performance Audit revealed that in ...(22.32% of cases test checked) there were lapses/errors which raised serious concern about the implementation of the scheme”, said the CAG report tabled in Parliament today.


The report deals with Agricultural Debt Waiver and Debt Relief Scheme (ADWDRS) 2008 under which 3.69 crore small and marginal farmers and 60 lakh other farmers were given debt relief to the extent of Rs52,516 crore.


The CAG report said in several cases “farmers who had taken a loan for non-agricultural purposes or whose loans did not meet eligibility conditions, were given benefits under the scheme.”


It said several farmers who were eligible for the benefit under the scheme were not considered for loan waiver by the lending institutions.


Besides other observations, the report said the microfinance institutions (MFIs) were given benefit under the scheme in violation of the debt waiver guidelines.


The banks, it said, also claimed undue benefits like penal interest, legal charges, miscellaneous charges from the government. Under the scheme, banks were supposed to bear these charges themselves.


Referring to the issue tampering of records, CAG suggested DFS should review such cases and take “stringent action” against erring officials and banks.




4 years ago

The present Agl.crop loan subsidy of interest against gold ornaments (i.e., just @4% p.a.) is similar misuse of the scheme, as most of the borrowers are realtors and other than agl. borrowers. No scale of finance is followed by the banks, no fool proof evidence is not envisaged, simply because the top brass pressurise the operational staff to meet their target, which is a safe lending and meets the priority sector lending benchmark.

Anil Agashe

4 years ago

CAG should name individual banks who have done wrong. Haul up the top management of these banks. Stop their pension and other benefits if they have since retired and if in service suspend them and conduct inquiry in 3 months.



In Reply to Anil Agashe 4 years ago

On the basis of the CAG report, it is for the government to take further action, if any. In India 'Law takes its course' and nothing happens that fast. 5 years have already gone. The tragedy is, where 'waiver' is a possibility, those who 'give' loans and those who 'take' loans, take things easy and keep waiting for the waiver announcement.

HSBC Services PMI falls to 54.2 in February

The robust pace of growth in the services sector witnessed in January could not be sustained in February as there was a decline in new business orders

India’s services sector witnessed “continued but slower” pace of expansion in February amid a decline in new business orders, an HSBC survey showed today.


The growth in the services sector, which makes up for nearly 60% of the country’s economic output, stood at 54.2 in February (down significantly from 57.5 in January), indicating a continued but slower, expansion of service sector activity in India.


A reading above 50 points indicates expansion, while a reading below 50 shows contraction.


The robust pace of growth in the services sector witnessed in January could not be sustained in February as there was a decline in new business orders.


“Activity in the services sector grew at a slower pace led by a deceleration in new business, but backlogs of work still increased,” HSBC chief economist (India and ASEAN) Leif Eskesen said.


Growth in service sector activity has now been sustained for 16 straight months and service providers are optimistic about the 12-month outlook for the sector.


Meanwhile, private sector companies continued to pass on higher costs to clients through increased output prices.


With the rate of inflation accelerating in both manufacturing and services firms, the overall pace of price rise was sharp, and the fastest in seven months.


“Input price inflation picked up notably, which was passed on to prices charged. The numbers underscore that the room for monetary policy easing is very limited,” Eskesen said.


Next six to eight quarters crucial for public sector banks?

Can PSBs withstand the storm of slow growth and higher bad debts? Or will they need government support?

The balance sheets of Indian public sector banks (PSBs) have been deteriorating for the past few years and the quantum of bad debt seemed to have got worse in the last few months, even if the rate of deterioration has slowed down. This has worried policy makers and market watchers. However, Espirito Santo Securities (ESS) believes that PSBs might have some breathing room for the next six to eight quarters, based on policy ‘reforms’ undertaken by the government, right from state electricity board (SEB) restructuring to diesel price hike, as well as initiatives from select private companies to restructure their businesses—from Suzlon to Hotel Leela to GMR, and so on. The report said, “(reforms) are a step in the right direction and we expect them to have a positive impact on the banking system in the next six to eight quarters”.

One of the key things that market watchers were expecting from the budget was the question of how the government would handle public sector banks (PSBs) as they have been deteriorating over the last few years and their solvency has been a concern, especially because PSBs have to be essentially capitalized by taxpayers’ money. According to ESS, gross slippage ratio (as a percent of advances) in the third quarter of the 2013 fiscal was as high as 2.6% for Tier-1 PSBs and 2.9% for Tier-2 PSBs (it runs into several thousands of crores if translated to actual figure). This is a high figure and a cause for concern.

What about recovery of bad debts? The ESS report said, “Our analysis of asset quality in the past eight quarters shows that asset quality has been volatile and one quarter of improved asset quality cannot be termed a recovery, as there has been minimal macro-economic improvement on the ground.”

Market watchers and bankers were hoping that the Union Budget 2013 would address some of their concerns. Alas, nothing major was announced though there were some measures to address PSBs’ solvency. One such measure is the Rs14,000 crore which is to be used towards re-capitalization of public sector banks for FY14, which is just marginally higher than the Rs12,500 crore budgeted last year. While it does not dramatically improve the balance sheet, it is something. Despite this, ESS expects slippages to be ‘volatile’, unless economic conditions improve. The report said, “We expect incremental slippages to remain volatile as the economic recovery is protracted.”

Another minor measure announced at the Union Budget 2013 was to remove the arbitrage between liquid funds and bank deposits. Most savers, earlier, were putting money in liquid funds to take advantage of taxation on distributed income on non-equity oriented mutual funds, which has now been doubled to 25%. This would mean, banks will expect more funds to come to savings accounts now. This is a positive for banks, including PSBs.

However, one of the bigger concerns for PSBs, according to ESS, is the issue of higher provision requirement, which will severely reduce the return on equity (ROE is one of the key measures used by Moneylife for its value pick section in the magazine). ESS said, “RBI has already increased the provisioning requirements on restructured advances. Given that most PSU banks have low provisioning coverage ratios (PCR), any incremental regulatory changes increasing the provisioning requirements are likely to exert more pressure on the RoEs of PSBs”.

Below shows the table and ratings of various PSBs according to ESS:

To summarise, it will be a wait-and-watch game for PSBs as economy is still moderating and no one knows for sure how global economy will affect domestic economy. There’s also a risk of inflation run-off, which means there could be a risk of RBI hiking interest rates (though most pundits expect inflation to moderate and rates to be cut towards end of the year), which could kill off PSBs’ momentum in recovery. ESS believes State Bank of India and Oriental Bank of Commerce are top buys while Punjab National Bank is a sell.



MK Gupta

4 years ago

PSBs, led by the premier SBI, are hardly interested in refurbishing their image with the common users of banking services in the retail sector--the individual customers. SBI branches, for info., never responds to or sends any emails and the Kalkaji Branch manager does not even have the courtesy of acknowledging the receipt of any mail! Despite repeated enquiries and SMSs to SBI's mobile helpline no., it is not possible to know which branches have DEMAT facilities in Delhi. Private banks send their representatives to the residence of any prospective customer to help open SB accounts. IDBI apart, this culture is not there in any PSBs including SBI which does not even send mobile alerts on debits and credits and invariably fail to send TDS certificates despite requests. IN addition, the TDS effected by the PSBs, SBI in particular, are never found in the official site for this purpose. Hence, theorising on the crucial road ahead for PSBs is rather ponderousness.

Ramesh Poapt

4 years ago

eye opener report! PSU banks r in lst or 2nd stage of recession and deterioration in deficits have put PSU banks in ICU. Basel III and other new RBI prudential provision norms will make PSU banks breathless...

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