NABARD to raise Rs 3.5 trn in FY23; bond issuance seen at Rs 45,000 cr

The National Bank for Agriculture and Rural Development (Nabard) is planning to raise Rs 3.5-3.6 trillion, including Rs 45,000 crore through long-term bonds, in FY23.

The balance will be from the shortfall in priority sector lending (PSL) and short-term instruments. G R Chintala, chairman, Nabard, said the scale of fund raising in FY23 was similar to what the institution did in FY22.

“While the average costs of funds came down sharply to 4.86 per cent in FY22 from 5.24 per cent in FY21, this year (FY23) we do not know how it is going to be,” he said.

The yield on long-term paper has hardened in markets in tandem with the change in the rate cycle and inflation. Outstanding long-term borrowing rose to Rs 2.8 trillion in March 2022 from Rs 2.18 trillion in March 2021.

Short-term borrowing declined from Rs 2.41 trillion in March 2021 to Rs 1.14 trillion in March 2022. But PSL shortfall deposits swelled from Rs 99,000 crore in March 2021 to Rs 2.52 trillion in March 2022.

Banks have to keep amounts equivalent to their shortfall in PSL targets in the Rural Infrastructure Development (RIDF) with institutions like Nabard.

Its balance sheet rose from Rs 6.57 trillion as on March 31, 2021, to Rs 7.57 trillion as on March 31, 2022, registering a growth rate of 15.22 per cent in FY2022. It has set a target to grow the balance sheet to Rs 8.75 trillion for FY23.

The loans portfolio expanded by 12.76 per cent from Rs 6.03 trillion in March 2021 to Rs 6.80 trillion at the end of March 2022. The share of long-term finance (investment credit) was Rs 2.39 trillion as against Rs 1.99 trillion as on March 31, 2021.

Viability plan for 22 RRBs

Nabard will work on a viability plan for 22 regional rural banks in the next six months to address issues of capital adequacy, business growth and human resources. 

The emphasis will be meeting growth capital needs, along with regulatory requirements. While regulatory minimum capital requirement is nine per cent, the intention is to maintain a 13 per cent level. 

As of March 2021, there were 43 regional rural banks operating in 26 states (except Sikkim and Goa) and three Union Territories (Jammu & Kashmir, Ladakh and Puducherry) with a network of 21,856 branches covering 696 districts. 

Their balance sheet witnessed a healthy growth of 10.8 per cent during FY2020-21 and stood at Rs 6.52 trillion as on March 31, 2022