Basel-III rules to give Nabard room to double balance sheet from April 2024

National Bank for Agriculture and Rural Development (Nabard) will get a head room to double its balance sheet from April 2024, when the Basel III norms kick in, compared to the Rs 8 trillion in the financial year ended March 2023.

Shaji K V, chairman of Nabard, said the institution was adequately capitalised now and under the Basel framework, the capital adequacy ratio will be over 20 per cent.

He said there was enough growth capital. When it comes to leverage ratio, the institution can leverage existing funds at a higher level to grow further.  Earlier, there was no leverage ratio stipulated. But now, there will be specific (four times) provisions under Basel, which allows Nabard to grow further. The institution wants to grow faster but can’t over-saturate the sector beyond its demand, he said. According to the annual report for financial year 2022-23 (FY23), Nabard’s balance sheet size has almost doubled from Rs 4.1 trillion to Rs 8 trillion during the past five years.

As the overall business horizon of Nabard has expanded, capital and reserves registered  growth of 52.4 per cent.

Its funding operations are focused on refinancing to lenders and loans for infrastructure creation in rural areas and irrigation, among others. Refinancing grew by 8.6 per cent Y-o-Y to Rs 4.24 trillion at the end of March 2023 from Rs 3.91 trillion a year ago. In infrastructure creation, its funding grew by 7.7 per cent YoY to Rs 2.45 trillion in March 2023 from Rs 2.27 trillion. On prospects for issuing bonds in the overseas market, Shaji said this option is at the back of the mind. The institution has to consider the pricing aspect as raising money abroad has cost implications due to foreign currency risks. Right now, the Indian market has enough liquidity to meet its requirements and also, the coupon (interest rate) is good.

Nabard is working on plans to enhance the visibility of institutions among its global investors. For this, it plans to hold road shows to generate interest and demonstrate that it is one of the stronger financial institutions from India. 

It has collaborations with the green climate fund of the United Nations and multilateral institutions like Asian Development Bank (ADB) and International Finance Corporation (IFC), the chairman added.