CAG urges EDC to overhaul loan management after audit exposes selective waivers

Panaji: The Comptroller and Auditor General (CAG) recommended a comprehensive overhaul of the EDC’s loan management practices after an audit exposed serious deficiencies, including selective interest rate reductions for borrowers, non-compliance with waiver schemes favouring certain defaulters, and inadequate recovery efforts despite favourable court verdicts.

“EDC may ensure strict adherence to the One Time Settlement (OTS) scheme conditions and optimise the recoveries on defaulted loans without selectively relaxing them for defaulters,” the CAG report said.


The audit, covering EDC’s loan management activities from 2018-19 to 2022-23, assessed whether loan sanctions and disbursements followed prescribed guidelines and whether recovery processes minimised waivers.

The findings paint a picture of systemic lapses across multiple areas. The CAG found deficiencies in loan appraisals and loan security that resulted in lower interest rates being charged. Compounding this, the board of directors failed to periodically review interest rates as required, while selective borrowers were offered interest rate reductions without clear justification.

In OTS cases offered to mining-affected loan accounts, the audit revealed non-compliance with scheme conditions, resulting in higher principal waivers being extended to selective defaulters, the report tabled before legislators said.

Recovery from defaulters of written-off loans was severely impacted by EDC’s lack of follow-up action despite favourable court verdicts. In some cases, the corporation failed to even file court cases, delaying resolution of defaults. Further weakening the recovery process, EDC did not accurately report defaulter data to Credit Information Companies like CIBIL, the CAG report said.

Perhaps most critically, the CAG observed “the absence of long-term corporate business planning with a vision to drive the business direction in EDC resulting in a continuous decline in the loan portfolio.” Despite accumulating annual profits of Rs 250 crore during the audit period, EDC retained these funds “without any realistic plan for its deployment in furtherance of the core mandate of lending to MSMEs.”

In its key recommendations, the CAG asked EDC to formulate a strategic business plan, including a “Vision-Mission document to steer business direction” as per govt’s mandate.