Nabard to raise Rs 10K cr

The National Bank for Agriculture and Rural Development (Nabard) is planning to raise more than Rs 10,000 crore from the market this financial year to fund cooperative and commercial banks.

The bank plans to raise Rs 3,000-4,000 crore through retail bonds and mop-up another Rs 2,000 by issuing certificate of deposits, short-term money market instruments.

"The balance will be raised through mix of sources like corporate bonds," a senior Nabard official said. The extent of dependence on market borrowings will be less this year for Nabard as compared with FY08 (Rs 13,000 crore) due to availability of Rs 5,000 crore from the National Rural Credit-short-term (NRC-ST) facility announced in the 2008-09 budget.

The interest rate for funds sourced from this corpus (NRC-ST) is expected to be 6 per cent, much less than the market borrowings which are made at an average 8 per cent interest rate. It plans to bring down the cost of funds below 9 per cent from 9.15 per cent in FY08. The cost was 8.75 per cent in 2006-07.

Referring to performance of the bank in FY08, Chairman Umesh Chandra Sarangi said, "The refinance division posted a net operational surplus of Rs 972 crore as against Rs 819 crore in 2006-07.

Nabard will deploy this surplus for short-term finance and funding various funds, including those for rural innovation and watershed development. In FY09, the bank has pegged short-term finance covering crop loans issued by regional rural banks and cooperative banks at Rs 22,000 crore. Refinance credit will be close to Rs 9,500 crore.

It will also step up co-financing activity for rural projects. It provided co-finance worth Rs 42 crore for 10 projects in 2007-08. "We will scale up operations and plan to fund projects worth Rs 600 crore this year," Sarangi added.