The financial assistance has been wasted, CAG said. The Chavan government had approved the financial assistance in Aug 2009, with retrospective effect from Mar 2008.
Last year, Chavan was forced to quit as Chief Minister after being linked to the Adarsh housing scam and is among those named in the Central Bureau of Investigation's First Information Report in the scam.
The CAG report, for the state government's accounts for the year ended Mar 31, 2010, was tabled in the state legislature on Thursday.
The report said the loan was sanctioned despite the Nanded bank's poor financial condition. An inspection report by the National Bank for Agriculture and Rural Development (Nabard) in Sept 2009 revealed the bank's net worth was negative at the end of 2008-09 and its crop loan disbursements were on a decline during 2004-09, it said.
The bank did not comply with the Reserve Bank of India's directions regarding acceptance and payment of deposits, and also defaulted on repayment to the Maharashtra State Cooperative Bank (MSCB).