CAG flag worries over treatment of bank recap consumption

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CAG Audit had concerns over the expenditure budget.

The budget expenditure on the recapitalization of the PSBs had been gotten against receipts from the issue of exclusive securities, while in the financial plan receipts, it shows they are from the bonds that have been against using on recapitalization.

The Comptroller and Audit General (CAG) has raised its flags over the treatment of spending of bank recapitalization during 2017-18 and 2018-19, expressing that it was against the regulations of the FRBM Act.

For recapitalization of state-run banks, the government set an investment of Rs.80,000 crore in 2017-18 and Rs.1.06 lakh crore in 2018-19 separately. The Audit saw that the use of Expenditure budget utilization on the recapitalization of the PSBs had been gotten against receipts from the issue of extraordinary protections, while in the receipt financial plan, it shows they from the securities have been against using on recapitalization.

Additionally, during the two financial years during 2017-18 and 2018-19, assets for these speculations were raised by the public authority through the issue of non-adaptable uncommon protections to similar PSBs.

As indicated by CAG, the ministry of finance had responded that bank recapitalization isn’t monetarily unbiased but cash impartial, as the issue of securities would get reflected in the complete government obligation.

Furthermore, coupon installments for the exclusive bonds made would result in the shortage of the pertinent year. Under this, the public authority issues recapitalization bonds to a PSB that needs capital.

Therefore, banks prefer the security against which the government gets the cash. Currently, as the money received goes as equity capital of the bank, the government doesn’t need to pay anything from its hand.

This separated, the CAG likewise called attention to the shortage inactivity of the National Small Saving Fund (NSSF), which involves all assortments of small saving plans. “The adjusts under NSSF don’t expressly unveil the generous amassed deficiency in the asset, which would need to be made great by the govt later on.

Also, there is an unclear disclosure that a huge amount of money was given from NSSF to revenue expenditure use of the government which needs to be settled.

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