Nabard profit declines 13%

National Bank for Agricultural and Rural Development (Nabard) on Thursday reported 13 per cent drop in its surplus (profit) to Rs 1,150 crore in 2005-06 from Rs 1,333 crore a year earlier, as rising cost of funds squeezed its margins.

The refinance institution had to forego interest income of Rs 330 crore as it decided not to pass on the increased cost to banks to keep the interest rates affordable for farmers, said YSP Thorat, chairman, Nabard.

Its loan outstandings increased to Rs 58,088 crore from Rs 48,355 crore. Of this, investment credit (advances for asset formation in the farm sector) rose to Rs 33,329 crore in 2005-06 from Rs 29,657 crore a year ago.

The strong growth in farm credit made commercial banks actively use Nabard's refinance window, which resulted in the refinance institution's disbursement rising by 56.8 per cent to Rs 4,028 crore in 2005-06.

Commercial banks are entitled for refinance support against lending to farmers. The refinance support is available for 5-15 year period.

Thorat said Nabard will finalise its fund raising plan for 2006-07 after the central government announces the kind of financial support for it, including short-term credit to farmers at 7 per cent. Nabard raised Rs 9,000 crore from the market in 2005-06.

Nabard would not have a smooth ride accessing the market for funds in 2006-07 as the government has withdrawn capital gains tax benefits.