Nabard to raise Rs 60,000 crore via non-convertible debentures this year

National Bank for Agriculture and Rural Development (Nabard) will raise long-term funds of Rs 60,000 crore through nonconvertible debentures in the current financial year. 

Its own requirements have been assessed at Rs 30,000 crore and the balance would be for the Centre to cover the shortfall in various schemes in rural development and sanitation in FY20.

The bank has already raised Rs 11,000 crore in the first quarter ended June 30, 2019.

Nabard chairman Harsh Bhanwala said it borrowed Rs 56,069 crore from the NCD market in 2018-19. Of this, Rs 33,169 crore was mobilised to support various central government schemes such as Pradhan Mantri Krishi Sinchai Yojana, Swatch Bharat Mission – Gramin and Pradhan Mantri Awas Yojana – Gramin.

Nabard has introduced new features like multiple pricing of bonds, tripartite repos and 15-year tenor debentures.

It is also tapping the short-term money market through certificates of deposit for partly meeting funding requirements.  

The volume of short-term money was Rs 2 trillion in 2018-19.  Some of other major sources of funds include Rural Infrastructure Development Fund (RIDF) deposits, short-term cooperative rural credit fund, short-term regional rural bank credit refinance fund and long-term rural credit fund.

These deposits will continue to be an important source of funds for Nabard (for FY15-FY19, it was 54%), as scheduled commercial banks are facing difficulties in meeting priority sector lending targets traditionally.

Its assets, comprising loans and investments, rose by 20 per cent to Rs 4.87 trillion at end of March 31, 2019. The low-margin RIDF lending business, which constitutes a sizeable proportion of Nabard’s loan portfolio, comprises low-risk assets.

India Ratings, in a rating report on Nabard, said the provisions of losses increased to Rs 522 crore in FY19 from Rs 186 crore in FY18 due to investment exposure of Rs 210 crore to Infrastructure Leasing and Financial Services (IL&FS), which defaulted on its obligations. Of the total exposure, however, principal redemption of Rs 25 crore (in the form of NCDs) by IL&FS is due in September 2019. 

The provision towards advances and investments is likely to rise in FY20 due to investment exposure to stressed non-banking financial companies or NBFCs such as Dewan Housing Finance Corporation Limited, which defaulted on Rs 5 crore of coupon payments to Nabard.

Nabard’s Tier-1 capital ratio was comfortable at 17.77 per cent in FY19, aided by regular equity injections from the Centre.