Nabard may raise Rs 30,000 crore through bonds in FY25, says CRISIL

The money raised through the market covering bonds and money market instruments had about 51.5% share in total borrowings by Nabard at the end of March 2024

National Bank for Agriculture and Rural Development (Nabard) is planning to raise up to Rs 30,000 crore through bonds in the current financial year (FY25) to support lending operations, according to rating agency CRISIL.

The money raised through the market covering bonds and money market instruments had about 51.5 per cent share in total borrowings by Nabard at the end of March 2024.

The government-owned development finance institution’s (DFI’s) total borrowings stood at Rs 7.89 trillion as of March 2024, according to CRISIL analysis. It has assigned a “AAA” rating to the proposed bond offering, which factors in support from the government of India. Nabard declined to respond to queries from Business Standard.

The balance sheet statement for FY24 showed the outstanding bonds and debentures stood at Rs 2.86 trillion in March 2024, up from Rs 2.46 trillion a year ago. Thus, the net borrowings through debentures and bonds grew by Rs 39,473 crore in FY24. Its debt-to-equity ratio stood at 10.96 per cent and capital adequacy ratio was 16.5 per cent at the end of March 2024.

The Union government’s fiscal management policies and financial reforms in the past few years have led to an increase in the institution’s reliance on market borrowings, resulting in higher cost of borrowings, CRISIL said.

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Another source of funds for the DFI is the deposits from commercial banks. The amount banks have to keep as deposits with Nabard is linked to the extent of the shortfall in meeting priority sector lending targets. Rural Infrastructure Development Fund deposits had close to 23.7 per cent share in total borrowings at the end of March 2024, CRISIL said.

As for its lending operations, its loan book is broadly divided into two segments: direct finance and refinance book. Direct finance, which includes loans to state government agencies as well as voluntary organisations, stood at Rs 4.47 trillion or 56.3 per cent of the loan book as on March 31.

CRISIL said the refinance loan portfolio of Nabard stood at Rs 3.47 trillion or 43.7 per cent of loans as on March 31. This support includes loans to state government, commercial banks, and regional rural banks as refinance against the loans disbursed by them to the final borrowers.