Lack of guidelines for sanctioning and disbursing construction loan, failure to ensure credit worthiness of loanee, sanctioning of loans at interest rate below cost of borrowings, and failure to ensure promoter’s contribution/repaying capacity had been detected in Kerala Transport Development Finance Corporation (KTDFC).

The Non-Banking Financial Company sanctioned and disbursed construction loans on a case-to-case basis as it did not have codified procedures and guidelines for appraisal, sanction, and disbursement of loans, the Comptroller and Audit General of India (CAG) noted after a detailed analysis of the appraisal, sanction, disbursement, and recovery of the construction and housing loans issued by KTDFC during the 2007-12 period.

In its report on the public sector undertakings in the State for the year ending March 2012, the CAG had pointed out that though construction loans were sanctioned under the broad frame work of Aiswarya Griha Housing Scheme (AGHS), the competent authority took various decisions involving deviation from the scheme without obtaining concurrence of the board.

Poor repaying capacity

In 35 cases amounting to Rs.83.14 crore that were test checked, the CAG had found that the company did not ensure the repaying capacity of the applicant. As a result, nine loans amounting to Rs.7.02 crore as on August 31, 2012, were under default.

The CAG pulled up KTDFC for sanctioning loans for Non-Resident Indians for investment in real estate business, and other immovable property and for commercial purposes violating the RBI Exchange Control Manual and AGHS norms.

Failure of KTDFC to ensure promoters contribution and repaying capacity had been detected. In one instance, the Managing Director sanctioned two loans of Rs.10 crore each within six months to a newly incorporated firm whose credit worthiness and repaying capacity was uncertain. It was also found that the land offered as security was reckoned at an inflated value of Rs.3.64 crore as against the purchase cost of Rs.28.50 lakh.

Sanctioning of loans at interest rate below cost of borrowings and non-compliance of the board decisions had come in for adverse remarks. The audit found that KTDFC sanctioned 68 loans at a reduced rate of interest during four months from January 2006.

The CAG observed that the company did not have any institutionalised mechanism for post disbursement monitoring of the progress of the work for which the loans were sanctioned. Internal control and monitoring was poor.

During the five years up to March 2012, KTDFC disbursed Rs.1,377.82 crore. The total loan outstanding as on March 31, 2012, was Rs.1,014.70 crore. The (Rs.899.11 crore) loan to the KSRTC constituted 90.70 per cent of the total loan disbursed by KTDFC which mobilised funds mainly through cash credit from banks and deposits from the public.


  • Loans given on a case-to-case basis

  • No codified procedures and guidelines


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