Nabard not averse to entering banking biz: chairman

The National Bank for Agriculture and Rural Development (Nabard), which has begun the process of restructuring its operations, is not averse to entering the commercial banking space, its chairman here here today.

Recently, Nabard appointed global management consultants Boston Consulting Group to prepare a report to restructure and diversify its operations with a view to leverage its expertise in refinancing.

"Without compromising our primary mandate, which is refinancing and supporting the needs of the agriculture sector, we will not be averse to any new ideas," Nabard Chairman U C Sarangi told reporters here.

Incorporated in 1982 by transferring the functions of the then Agriculture Refinance and Development Corporation and the agriculture credit functions of the Reserve Bank, Nabard has the mandate to ensure adequate credit flow to the farm sector and supervise cooperative banks and regional rural banks (RRBs).

Boston Consulting, which started its study last month to explore various areas where Nabard has the potential to operate, is likely to submit its report by November-December, Sarangi said. "They will do the study...Let them come back. Then we will see (about the possible options of entering the commercial banking space)," Sarangi said when asked about Nabard's plan to enter banking.

At present, the Reserve Bank is the majority shareholder in Nabard. Out of its Rs 2,000-crore paid-up capital, Rs 1,450 crore is contributed by the apex bank while the rest Rs 550 crore is from the government.

If Nabard enters the banking space, it will not be the first state-owned entity to float a bank. In 2004, Industrial Development Bank of India, which was initially set up as a development financing institution, had forayed into banking.

It can be noted that the government in the Budget 2011 announced that it is willingness to allow more players in the banking space with a view to take the reach of banking operations into more under-banked areas.

The Reserve Bank is currently preparing the guidelines for new banking licences, which is expected to come out in the near future. A host of private players, including the Tatas and the Anil Ambani Group, among others are interested in banking once the final guidelines are out.

Recently, Financial Services Secretary R Gopalan said new banks should not be a disadvantage to the existing ones and these new players should not localise their operations but should operate on a pan-India basis.