Nabard Weighs Refinancing Of Nbfcs

The National Bank for Agriculture and Rural Development (Nabard) is weighing the possibility of refinancing non-banking financial companies (NBFCs) on a selective basis. The bank had started refinancing of urban banks last year.

Y C Nanda, Nabard chairman, said the bank was preparing a list of NBFCs active in rural India. The bank will primarily refinance NBFCs involved in aiding sale of tractors, tillers and vehicles required for agriculture and other allied activities.

"If we can refinance banks, why not NBFCs with strong fundamentals and good network," he asked.

"We are tracking a few NBFCs operating in rural India with strong financials and those which are from large industrial groups," he said. The bank hopes to start the refinance business this fiscal itself.

 

Citing an example, Nanda said the financing arm of Mahindra & Mahindra was doing a good job in the rural areas. The company helps farmers by funding new irrigation techniques and agricultural equipment such as tractors. This, in turn, has increased yields and also demand for agricultural finance.

Nabard is looking at finance companies with similar strengths and profile as possible partners to help promotion of extension services that Nabard has undertaken. At present, the national bank has 200 such extension services.

"The NBFCs should compliment the system and should add value," the chairman said. Another criteria for selection of a financial company will be its network and good reach, he added.

Nabard has been laying more emphasis on agro and food processing and post-harvest management with upgraded technology. In this field also, the bank would tie up with companies that match the criteria.

It also proposes to initiate dialogue with state governments to explore the possibility of financing agricultural export zones (AEZ) to be identified by the state governments, as announced in the Union Budget.

Also under study is the possibility of aiding manufacture of special value-added products. Extending refinance support to agri-clinics and agri-business centres too would be explored.

Nabard has advanced a total of Rs 18,000 crore as short-term loans last year, and has set a target to raise it to Rs 20,000 crore in 2002-03.

The bank raised Rs 2,970 crore through its capital gains bond last year and another Rs 1465 crore this year. It hopes to mop up a total of Rs 2,200 crore through bonds issues and another Rs 200 crore from banks for book building.