A rural development borrower has to repay a loan within 10 years if the borrower has no children.
It’s a controversial concept in rural India and, for the first time, a senior official has been arrested for his role in the scheme.
Gokul Sharma, who has been charged under the Rural Development Loans (RDL) Act, has been accused of not only breaching the law but also defrauding the government of millions of rupees.
The scheme was designed to provide financial support to families with a small amount of cash, a cash-strapped state government told NDTV, but Sharma has admitted to being in charge of the scheme’s implementation.
Sharma had allegedly used the RDL Act to pay off loans to a small number of beneficiaries who were not in need of help.
He was also accused of illegally selling loans from the scheme to a company for use in private ventures.
The RDL, which was originally introduced in 2010, provides loans to families to buy land, renovate homes and provide other services.
The government had to find a way to cover the cost of the loans for more than 60,000 households.
The Rural Development Loan Act was introduced in 2016, but the scheme was suspended in January 2017.
Shahram Azad, a former minister of state for land, irrigation and climate change, has reportedly been arrested and charged with money laundering, fraud and embezzlement.
The former minister, who is also the president of the ruling party’s local unit, was a senior member of the Rural Affairs and Planning Commission (RAPC) at the time of the suspension.
According to a report in The Economic Times, Sharma’s arrest comes just days after the Reserve Bank of India announced it would not be lending to rural projects under the RDD.
The state government has not revealed exactly how many rural loans were cancelled in the first two months of the financial year.
However, Sharma has been given a suspended jail term of six months.
According, the Reserve bank of India has stopped issuing loans under the rural development scheme, the RDP, as of July 27.
It will not be issuing loans again under the new rural development policy till the state finances a new scheme for rural development.