Nabard to launch NBFC for microcredit

Targeting the microcredit space, the National Bank for Agriculture and Rural Development (Nabard) is launching a non-banking financial company (NBFC).

To be christened as Nabard Financial Services (Nabfins), the institution will have an authorised capital of Rs 100 crore and an issued capital of Rs 20 crore. While Nabard will subscribe to the extent of 51% equity, the remaining is expected to be held by banks, and state governments among others.

YSP Thorat, chairman, Nabard, today said the main aim behind the initiative is to create an institution as a model to be emulated by other players in the micocredit space. "Currently, micro-finance operations in the country have been bogged down by problems such as lack of transparency in accounting procedures, high transaction costs, poor diversification of products, high rate of interest and coercive collection procedures. Our institution will function without any of these issues," Thorat said.

To be headquartered at Bangalore, the company will start its operations initially in Karnataka on a pilot basis, and later extend to Andhra Pradesh and Tamil Nadu. "Banks are desirous of teaming up with Nabard in this initiative," he said. Maintaining that the rate of interest to be charged on microcredit will be reasonable, he, however, said the institution would not follow any rigid formula in this regard.

In a new trend of sorts, Nabard is also co-financing projects to the extent of Rs 600 crore during the current year. A Rs 360-crore biodiesel plant in Punjab, and a vinery project promoted by vine growers at Ratlam, Madhya Pradesh are among these projects, which, according to Thorat, require co-financing because no banking institution is ready to providing the entire finance due to the risks involved. "Nabard will play a catalytic role in bringing these projects into existence through co-financing."

According to the Vaidyanathan Committee recommendations, on the revival of cooperative credit institutions in the country, Nabard will provide Rs 640 crore to district central cooperative banks (DCCBs) in Andhra Pradesh and Rs 63 crore to those in Haryana for recapitalisation.