The financial assistance has been wasted, CAG said. The Chavan government had approved the assistance to the bank in Chavan's home district in August 2009, with retrospective effect from March 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 FIR in the scam.
The CAG report, for the state government's accounts for the year ended March 31, 2010, was tabled in the state legislature yesterday.
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 September 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).
The Nanded bank's borrowing power under the Banking Regulation Act's rules remained nil and non-performing assets (bad loans) as a percentage to loans outstanding had increased to 70.7% as on March 31, 2009, from 58.5% as on March 31, 2008, it said, adding, the net worth remained negative during 2009-10.
The government's assistance of Rs 118.50 crore came in useful to the Nanded cooperative bank only to discharge its liabilities, which were around Rs 310.67 crore. However, the real objectives for sanctioning of the grant, especially for the improvement of net worth and increasing crop loan disbursements, were not achieved, it said.