Will the CAG help in cleaning up the rot in India’s financial allocations?

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On 16 May, 2023, E A S Sarma, former Secretary to the Government of India wrote an email letter of complaint and request to the Comptroller and Auditor General (CAG) of India (, with copies to <>, Nirmala
the finance minister, Nimala Sitharaman, TV Somanathan, finance secretary, and the secretary of the the department of economic affairs. A copy of that letter can be obtained from the URL mentioned above.

It is about the reckless, often untraceable, squandering of public funds on the one hand, and the danger the new financial mechanism of the Aadhaar card poses for India’s security, banking and even its very security.  The new mechanisms introduced by the government threaten to abet money laundering, impersonation, and inflating the number of election cards.  In other words they threaten to create havoc with the National Population register.  Some of these issues have already been highlighted at  and at (Subscription to the substack link is free).

The letter follows:

Proliferation of fake Aadhaar Cards and false Jandhan bank accounts pose a serious threat to proper use of the Centre’s expenditure under Centrally Sponsored Schemes


Shri G C Murmu


Dear Shri Murmu,

Subject:- Proliferation of fake Aadhaar Cards and false Jandhan bank accounts pose a serious threat to proper use of the Centre’s expenditure under Centrally Sponsored Schemes (CSSs)

Please refer to my letter dated 7-10-2022 on the subject (, with special reference to two Centrally Sponsored Schemes (CSSs), PM Fasal Bhima Yojana (PMFBY) and  PM Kisan Samman Nidhi Yojana (PMKSNY). While private insurers seem to benefit under PMFBY, not the farmers, there have been complaints of large amounts under PMKSNY going to ineligible persons in different States as a result of the proliferation of fake Aadhaar Cards and false Jandhan bank accounts.

False Aadhaar identity cards also adversely impact the integrity of India’s elections.

With special reference to funds transfers under the CSSs, this needs to be viewed against the background that, since 2014, there has been a tendency on the part of the political leadership to diminish the share of fund transfers to the States as per the rule-based allocation formula prescribed by the Finance Commission and, instead, unduly enlarge the share of fund transfers under Article 282, which permit the Centre to impose schemes on the States in a somewhat subjective manner, irrespective of their relevance to the requirements of each State. In the Budget of 2023-24, more than 83% of the funds transferred by the Centre to the States are through CSSs and other Central Schemes that bypass the Finance Commission allocation formula. In monetary terms, this amount is Rs 8,23,857 Crores.

According to a Lok Sabha reply on 26-7-2017 (Parliament Question No. 1761), there are 314 CSSs in 51 Central Ministries linked to Aadhaar (/ In most cases, under these CSSs, the Centre transfers funds directly to beneficiaries’ bank accounts, without going through the concerned States and the local Panchayats, thereby precluding any independent verification.

In the CAG Report No 24/2021, referring to the problem of “duplicate” Aadhaar Cards, the CAG exhorted the UIDAI to “tighten the SLA (Service Level Agreement) parameters of Biometric Service Providers (BSPs), devise foolproof mechanisms for capturing unique biometric data and improve upon their monitoring systems to proactively identify and take action to minimize, multiple/ duplicate Aadhaar numbers generated. UIDAI may also review a regular updation of technology. UIDAI also needs to strengthen the Automated Biometric Identification System so that generation of multiple/duplicate Aadhaars can be curbed at the initial stage itself”. Apparently, UIDAI has not been able to implement this recommendation fully as indicated below.

Shri R Bhaskar, a journalist based in AP analysed the government’s replies given in the Parliament and other authentic information available in the public domain to make an assessment of the number of false Aadhaar Cards in circulation. The relevant article can be accessed at The following are the findings that emerge from this analysis:

  1. There are at least 9 States today in which the number of Aadhar Cards exceeds the projected population of the States. This number was 7 in February 2020.
  2. In almost all the States (excluding A&N, Sikkim and Arunachal Pradesh), between 31-12-2021 and 28-2-2023, there has been a suspicious surge in the number of Aadhaar Cards. The average surge at the All India level is 2.7%, with 9 States showing surge rates in excess of that. In Meghalaya, the surge in Aadhaar Cards has been as high as 24.5% and 9.3% in Assam
  3. To quote from the article, “20 states had registered a swell in Aadhaar registrations within a 15-month period from 31 December 2022 and 28 February 2023. What is worrisome is that many of these states are alongside international land borders. The highest surges have taken place in NorthEastern States, Uttar Pradesh, and Bihar. That does call for a major investigation”
  4. One way to authenticate the number of Aadhaar Cards could have been through a formal population enumeration based on Census conducted in accordance with the Census Act. Unfortunately, the present government has, as in several other cases of statistical reports, not chosen to come up with the 2021 Census figures.
  5. With Aadhaar becoming omnipresent in the lives of people today, with their bank accounts, PAN Cards, health data, electoral identity and what not, linked to their Aadhar Cards and with huge amounts of bank transfers made regularly by the Central Ministries directly to the bank accounts of individuals, the scope for misuse of the Aadhaar Card and proliferation of fake Aadhaar Cards has steeply increased.

What Shri Bhaskar has pointed out confirms the fears expressed in several earlier news reports, some of which are accessible at the following weblinks:

Compounding this is a parallel misuse of Jandhan bank accounts to which the Centre has been transferring funds to millions of CSS beneficiaries, without any independent verification by the local Panchayats. This has resulted in the proliferation of false Jandhan bank accounts as also their misuse for laundering money. The relevant news reports are at

Raising concerns that Jan Dhan accounts can be misused by ‘money mules’, RBI … warned they are “very vulnerable” to frauds and asked banks to be on guard against such activities (

In many remote areas where broadband connectivity does not exist, genuine beneficiaries under different schemes find it difficult to get their Aadhaar identification done, resulting in their not being able to receive the benefits (

This shows that many unauthorised persons are benefitting from the funds released by the Centre under the CSSs, whereas several genuine beneficiaries, who ought to have benefitted under those schemes, stand deprived of the same.

Considering that 314 CSSs involve direct bank transfers by the Centre to the beneficiaries’ accounts through linkage to their Aadhaar identity, covering fund transfers amounting to around Rs 8,23,857 Crores, bypassing the States and the local Panchayats, implying a lack of adequate public accountability, with clear evidence of the proliferation of fake Aadhaar Cards on the one side, coupled with the existence of false Jandhan bank accounts on the other side, there is a clear possibility of large scale misuse of funds transferred by the Centre under Article 282, bypassing the rule-based transfers prescribed by the Finance Commission.

I request the CAG to conduct a special audit of the CSS fund transfers so that the extent of misuse and misapplication of the budgeted allocations may be reported to the Parliament and the public at large.


Yours sincerely,

E A S Sarma
Former Secretary to the Government of India


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