The National Bank for Agriculture and Rural Development (Nabard) is likely to come out with private placement of three-year capital gains bond in the next two-three days. Issuance of the bond, though had got the Cabinet's approval, is waiting for the presidential nod.
Any capital gains made out of the investment in the bond will be exempted from the taxation as per the new section 54EC of the Income Tax Act, 1961. The National Highways Authority of India (NHAI) had already issued a similar capital gains bond and collected Rs 500 crore from the market.
Nabard is looking to mop up nearly Rs 1,500-1,600 crore through the new bond.
YC Nanda, managing director, Nabard, however, is not hopeful that the bank would be able to make profits by investing the mopped up resources. Nanda said, "As the bond is associated with tax benefit, it will help us to get resources at a lower than market rate. However, I am not hopeful whether we could make money out the reinvestment of the collected resources." Nanda said that the average cost for raising funds will be around nine per cent.
The investments with a minimum amount of Rs 10,000 and in multiples of that will get full and firm allotment. The issue will be on tap and Nabard will retain the entire amount received.
Nabard is a national level statutory organisation with owned funds base of Rs 17,184 crore and total assets of Rs 33,367 crore as on March 2000. It has low non performing assets (NPA) level of 3.54 per cent and a high capital adequacy ratio of 44.24 per cent.
Nanda said, "We have a low NPA level in comparison with many of the banks. However, the level is still high. But, I am hopeful that the bank will be able to get back the rest amount."
