Poor loan recovery by KVIC led to overdue amount of Rs 551 crore

NEW DELHI: Inadequate loan recovery process by Khadi and Village Industries Commission ( KVIC) resulted in non-recovery of Rs 551.46 crore, a CAG report has said.

The report also said that due to non-recovery of loans, funds amounting to Rs 226.70 crore, which were meant for development through execution of various schemes and programmes, were diverted to service the loans of institutions.

The KVIC Loan Rules, 1958, empowered the commission to extend financial assistance in the form of loans to various institutions registered with it or with Khadi and Village Industry Boards of state governments.

The financing was facilitated through budgetary sources of Government of India in the form of loan to KVIC.

KVIC also disbursed funds to KVI institutions under the Consortium Bank Credit (CBC) arrangement with State Bank of India ( SBI) during 1995-96 to 2001-02.

KVIC used to draw funds from SBI and was directly engaged in disbursements to beneficiaries (KVIBs and institutions) and was responsible for recovery of loan amounts of principal and interest from the beneficiaries for repayment to SBI.

As on March 31, 2015, total loan outstanding was Rs 1,008.30 crore (GOI) and Rs 509.3 crore (CBC) and an amount of Rs 272.48 crore and Rs 278.98 crore was overdue with beneficiaries in respect of loans from KVIC funds and CBC funds, the report said.

"It was noted that KVIC did not have a system in place to pursue recovery of the outstanding loans amounting to Rs 272.48 crore overdue (March 2015). Recovery of principal from beneficiaries against loans from CBC funds was also poor and the outstanding of overdue principal on loans from CBC funds with the beneficiaries stood at Rs 278.98 crore (March 2015).

"To meet repayment to SBI under the CBC arrangements, it was seen that KVIC had diverted funds meant for development through execution of schemes and programmes. An amount of Rs 226.70 crore had been diverted for payment to SBI (principal) up to March 2015," the audit watchdog said.

The remarks are part of the Union Government (Civil) Compliance Audit Observations report for the year ended March 2015, which was tabled in Parliament today.