Debt Trap

Debt Trap

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According to the Report no. 3 of 2013-Union Government (Ministry of Finance)-Report of the CAG on Implementation of Agricultural Debt Waiver and Debt Relief Scheme. 2008,

•    The Agricultural Debt Waiver and Debt Relief Scheme (ADWDRS), 2008 was launched in May 2008 to address the problems and difficulties faced by the farming community in repayment of loans taken by them and in helping them qualify for fresh loans. Under the scheme, complete waiver of eligible amount was to be provided to marginal/ small farmers while a one-time relief of 25 percent of the eligible amount was to be provided to other farmers subject to payment of the balance 75 percent of the eligible amount by the farmer. Agricultural loans meeting the following set of conditions were to be covered under the scheme: a. Loans disbursed between 1 April 1997 and 31 March 2007 and b. Overdue as on 31 December 2007; c. Remaining unpaid upto 29 February 2008. The scheme was to be implemented by 30 June, 2010.  

•    The Government of India estimated in May 2008 that about 3.69 crore marginal/ small farmers' accounts and about 0.60 crore other farmers' accounts would be covered under the scheme. Over the last 4 financial years, the GoI has waived more than Rs. 52000 crore related to approximately 3.45 crore small/ marginal and other farmers.

•    The review, carried out by the CAG from April 2011 to March 2012, covered 25 states involving field audit of a total of 90,576 beneficiaries'/ farmers' accounts in 715 branches of lending institutions situated in 92 districts. The sample included 80299 accounts of such farmers who were extended benefit under the scheme, 9334 accounts of such farmers who were not selected as beneficiaries even though they had received agricultural loans between 1 April 1997 to 31 March 2007 and 943 cases where complaints were received.

•    Out of 9334 accounts test checked in audit across nine states, 1257 accounts (13.46 percent) were those which were found in audit to be eligible for benefit under the scheme, but were not considered by the lending institutions while preparing the list of eligible farmers.

•    Out of 80299 accounts granted debt waiver or debt relief, in 8.5 percent of cases, the beneficiaries were not eligible for either the debt waiver or the relief. 

•    A Private Scheduled Commercial Bank have received reimbursement for loans, amounting to Rs. 164.60 crore extended to micro finance institutions (MFIs) in violation of the guidelines.

•    Maintenance of proper and complete documentation with respect to each claim was critical to efficient management of the scheme. Audit noted that in 2824 cases, with claims amounting to Rs. 8.64 crore, there was prima facie evidence of tampering, over-writing and alteration of records.

•    Audit scrutiny revealed that in 4826 accounts i.e. almost 6 percent of the test checked accounts, farmers were not extended the benefits according to entitlements. In 3262 cases, undue benefit totaling Rs. 13.35 crore was extended. On the other hand, in the remaining 1564 cases, farmers were deprived of their rightful benefits of Rs. 1.91 crores.

•    In violation of guidelines, lending institutions claimed amounts related to interest/ charges which was not allowed under the scheme. In 6392 cases across 22 states, although the lending institutions had not borne interest/ surcharge of Rs. 5.33 crore themselves, they were still reimbursed these amounts by the GoI.

•    Department of Financial Services (DFS) accepted the reimbursement claims of RBI in respect of Urban Cooperative Banks amounting to Rs. 335.62 crore despite the fact that even the total number of beneficiaries' accounts was not indicated.

•    Debt waiver/ relief certificates were not issued in many cases to eligible beneficiaries. In 21182 accounts (out of 61793 test checked accounts) i.e. 34.28 percent, there was no acknowledgement from farmers or any other proof of issue of debt waiver or debt relief certificates to the beneficiaries. Such certificates entitle the farmers to fresh loans.

•    The monitoring of the scheme was also found to be deficient. The DFS was completely dependent upon the nodal agencies for monitoring the compliance of its instructions issued from time to time in implementation of the scheme. But audit found that the nodal agencies themselves were relying on certificates and data of lending institutions without conducting independent verification of such data and certificates to confirm the veracity of claims.

Rural Expert

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