Former Maharashtra Chief Minister Ashok Chavan, while in office, was instrumental in converting a loan of Rs. 100 crore and Rs.10 crore share capital into grant, for a cooperative bank in his hometown Nanded, formerly headed by his relatives.
The Nanded District Central Co-operative Bank Limited (NDCCB) formerly had as its directors Mr. Chavan's sister and brother-in-law Bhaskarrao Patil Khatgaonkar, who was elected Nanded MP in 2009.
According the report by the Comptroller and Auditor General (CAG) of India, released on Thursday, the Maharashtra Cabinet Committee in August 2009 approved a proposal from the bank “for conversion of loan of Rs. 100 crore and share capital of Rs. 10 crore into grant.” Mr. Chavan was the Chief Minister at the time.
The Committee also waived interest of Rs. 8.50 crore, bringing the total assistance to Rs. 118.50 crore. This aid, the CAG noted, was “injudicious” as the bank failed to meet the purpose of the grant itself.
The report states, “The government assistance of Rs. 118.50 crore came in useful to the NDCCB only to discharge its liabilities, but the real objectives for sanctioning of the grant i.e., improvement of net worth and increasing crop loan disbursements, were not achieved.”
RBI strictures on bank
“On account of [the bank's] poor financial condition, the Reserve Bank of India also imposed restrictions on acceptance and refund of deposits by it [in October 2205.]”
The CAG rejected the government's explanation that “the financial position of NDCCB had improved after conversion of loan and share capital into grant.”
In fact, it observed that the loan of Rs. 100 crore was sanctioned to the bank in 2007, “despite its poor financial condition.”