Unutilised amount of Rs 85.75 Cr remained locked up with UTLBC for 341 days: CAG

An un-utilised amount of Rs 85.75 Cr out of Rs 750 Cr, released by J&K Finance Department for implementation of its interest subvention scheme under its Business Revival Package 2020, remained locked up with Union Territory Level Bankers’ Committee (UTLBC) for 341 days, and the funds were not credited to eligible beneficiaries, in violation of norms.

As per the terms and conditions of the sanction, the funds were to be credited immediately to eligible beneficiaries.

The Comptroller and Auditor General (CAG) of India flagged a startling revelation in its compliance audit report for the year ended March 2022 on Revenue and Public Sector Undertakings (PSUs) of J&K.

Considering the difficulties being faced by the various sectors of the economy in J&K, a committee was constituted in August 2020 by the Industries and Commerce Department, Government of Jammu and Kashmir for preparing a proposal for relief and revival of the business sector in the Union Territory.

The Committee, in September 2020, submitted its report after deliberations with various business associations in the UT.

Based on the recommendations of the Committee, the J&K Finance Department in October 2020 approved scheme of interest subvention of five per cent for all borrowers, excluding borrowers under Kissan Credit Card (KCC), Artisans Credit Card (ACC), loan against deposits, loans under personal segments and Non-Banking Financial Corporation (NBFC) for a period of six months with effect from April 1, 2020.

The benefit under the scheme was to be provided to those borrowers whose accounts were standard as on July 31, 2019 or March 31, 2020, whichever is applicable.

The scheme also provided for pending interest subvention under the rehabilitation schemes of 2014 and 2016. The scheme was floated by J&K Industries and Commerce Department whereas the Finance Department was the implementing agency and the Union Territory Level Bankers’ Committee (UTLBC) acted as a monitoring agency for the scheme.

J&K Finance Department in October 2020 approved the Business Revival Package with financial implication of Rs 950 Cr for the Interest Subvention Scheme of 2020 and an amount of Rs 139.24 Cr for rehabilitation schemes of 2014 and 2016.

J&K Finance Department, however, released Rs 750 Cr in three tranches during October 2020 to May 2021 to UTLBC, which included an amount of Rs 138.03 Cr, earmarked for rehabilitation schemes of 2014 and 2016.

As per the audit, out of Rs 750 Cr, an amount of Rs 526.50 Cr was utilised towards five per cent Interest Subvention Scheme of 2020 and an amount of Rs 137.75 Cr was utilised for the Interest Subvention Schemes of 2014 and 2016.

“It was also noticed that the unutilised amount of Rs 85.75 Cr remained locked up with UTLBC for 341 days i.e., from May 14, 2021 to April 19, 2022 though as per the terms and conditions of the sanction, the funds were to be credited immediately to eligible beneficiaries and were not to be parked unnecessarily,” the CAG report revealed.

The UTLBC refunded the balance amount in April 2022.

On being pointed out by audit in April 2023, the J&K government, in December 2023, attributed the reasons for parking of funds to the receipt of representations by UTLBC from the trade bodies, individuals and firms claiming their eligibility under the scheme.

“The reply of the government is not satisfactory as the funds were required to be credited immediately to the eligible beneficiaries and were not to be parked as per terms and conditions of the sanction order, whereas the unutilised funds remained parked for 341 days with the UTLBC,” the report noted.

Not only this, the report also revealed interest subvention to ineligible accounts.

As per the conditions of the Scheme, the benefit was to be provided to those borrowers whose accounts were standard as on July 31, 2019 or March 31, 2020 whichever is applicable.

However, as per audit report, it was noticed that Jammu and Kashmir Bank Limited (JKBL) provided interest subvention to 2.43 lakh accounts under the Scheme which included 1,243 accounts that were restructured by the JKBL in February 2017 under the rehabilitation package rolled out by it.

Audit analysis showed that these 1,243 accounts were wrongly considered as standard accounts as on July 31, 2019 by the JKBL and were provided interest subvention of Rs 6.78 Cr under the scheme of 2020.

These accounts were classified as Non-Performing Assets (NPA) by the Bank in March 2020 with retrospective effect in accordance with the RBI norms.

By considering these 1,243 accounts as standard accounts on July 31, 2019, the Bank extended undue benefit of interest subvention of Rs 6.78 Cr under the scheme of 2020, against the conditions governing the Scheme as these accounts were NPA as on July 31, 2019 as well as on March 31, 2020.

On being pointed out by audit in April 2023, JKBL confirmed that these accounts were downgraded as NPA with effect from February 2017.

However, the J&K government, in its reply in December 2023, stated that these accounts were provided interest subvention as per the guidelines of the scheme as they were ‘standard’ as on July 31, 2019.

“The reply of the government has not taken into account the fact that the effective NPA classification dates of these accounts were when they were restructured (between November 2016 and February 2017),” the report stated.