NABARD - Sources and Uses of Funds

NABARD - Sources and Uses of FundsThe operations of NABARD are governed by owned funds, funds from various sources supplemented by market borrowings. Total Working funds of NABARD increased from Rs.1,36,292 crore as on 31.03.2010 to Rs.1,58,872 crore as on 31.03.2011. The increase during the year was mainly contributed by increase in RIDF deposits, Market borrowings and STCRC Fund.

The main sources of Funds have been grouped below -

1. Sources of Funds

1.1 Own Funds

The authorised capital of NABARD is Rs.5,000 crore and the paid up capital is presently Rs.2,000 crore (99% is subscribed by the GoI and 1% by the RBI). The total capital, Reserves and Surplus aggregated to Rs.13862.72 crore (8.7% of working funds) as on 31.3.2011. GoI has recently taken a decision to augment our share capital by Rs.3000 crore in tranches first of which amounting to Rs.1000 crore is likely to be subscribed during current financial year. Balances under NRC (LTO) and NRC (Stabilization) Funds stood at Rs.16,045 crore as on 31.03.2011.

1.2 Deposits

NABARD accepts Deposits from tea, coffee and rubber companies based on schemes announced by the Government of India in consultation with the respective Commodity Boards. The deposits from them stood at Rs.228.29 crore as on 31.03.2011. The amount under "deposits" stood at Rs.277 crore as on 31.3.2010.

NABARD received deposits from commercial banks under Rural Infrastructure Development Fund. The RIDF deposits were Rs.67877.63 crore as on 31.03.2011. The interest rates on these deposits are inversely related to the extent of default in achieving the 18% mandated target for lending to agriculture.

STCRC Fund: Short Term Cooperative Rural Credit (Refinance) Fund (STCRC) was created in the year 2008-09 with a corpus of Rs.5,000 crore per year for 3 years to support short term credit operations of NABARD. The balance under the fund as on 31.03.2011 was Rs.14,622 crore. ST credit facility is extended to Cooperative banks out of this fund.

1.3 Borrowings

1.3.1 Bonds

NABARD raised funds from the market through Corporate Bonds. In the past Government of India had permitted NABARD to raise resources through Capital Gains Bonds (CGBs) [which was withdrawn since 1 April 2006] . Reserve Bank of India had permitted NABARD to issue Priority Sector Bonds (PSBs) which aided Banks not meeting the mandated 40% to priority Sector or 18% to agriculture to invest in PSBs issued by NABARD which facility has been withdrawn with effect from 1 April 2006. RBI also authorised issue of SLR Bonds by NABARD from inception till 1998 [investment in these bonds were reckoned for SLR purposes]. Consequently, the issue of Corporate Bonds has become the major source of raising resources. Government of India announced permission to issue of Bhavishya Nirman Bonds [which are Zero Coupon Bonds] upto Rs. 10000 crore in the Union Budget 2006-07. Government of India further announced permission to issue of Rural Bonds [which are Bonds qualifying for tax exemption under section 88 of the Income Tax Act] upto Rs. 5000 crore in the Union Budget 2007-08. Total amount under "Bonds & Debentures" stood at Rs. 26,788 crore as on 31.3.2011.

1.3.2 Certificate of Deposits and Commercial Papers

In order to meet the gap in resources for extending support to banks and for meeting other obligations, NABARD has been permitted to raise resources by way of Certificate of Deposits (CoDs) and issue of commercial Paper. The outstanding was Rs.137 crore and Rs 6447 crore respectively under these instruments as on 31.3.2011.

1.3.3 Funds from GoI

NABARD has received Rupee Loans from Government of India against Foreign currency loans as part of bilateral assistance tied to agricultural projects implemented by NABARD. The outstanding was Rs.124 crore as on 31.3.2011.1.3.4 Corporate Borrowings

NABARD has borrowed from Banks as part of Corporate Borrowing which stood at Rs.500 crore as on 31.3.2010 has been fully repaid as on 31.03.2011.1.3.5 Borrowings in Foreign Currency

NABARD has borrowings in foreign currency from KfW, Germany as part of Indo-German cooperation which stood at Rs.503 crore as on 31.3.2011.

Balances available under different funds created out of gifts, grants, donations and under other funds like WDF, TDF, MFDEF, FTTF, etc. were Rs 2601 crore and Rs 3431 crore respectively.

2. Uses of Funds

2.1 Loans and Advances

2.1.1 Schematic Lending

NABARD refinances terms loans provided for eligible purposes by Commercial Banks, RRBs (Regional Rural Banks), SCARDBs, SCBs (State Cooperative Banks), ADFCs (Agri-Development Finance Companies) and PUCBs (Primary Urban Cooperative Banks). Refinance assistance stood at Rs.38,896 crore as on 31.3.2011. The refinance outstanding against SCARDBs has, however, been shown in the balance sheet under investments in SDDs floated by them.

2.1.2 ST, MT and MT (Conversion) Loan Assistance

NABARD also advances Short Term loans for financing SAO (Seasonal Agricultural Operation) to the SCBs and RRBs. NABARD also advances Short Term loans for financing loans other than SAO (Seasonal Agricultural Operation) to the SCBs and RRBs. Loans are also provided to select Apex Cooperatives. Loans outstanding for the purpose was Rs 33,885 crore.

Loans for conversion of ST SAO to MT loans was provided to the extent of during the year and the loans amounting Rs 193 crore were outstanding as on 31.03.2011

Outstanding under MT non schematic and Liquidity support were nil as on 31.01.2011

2.1.3 Co-financing

NABARD also gives loans to corporates as part of co-financing with other banks which stood at Rs.88 crore.

2.1.4 Loans to State Governments

a. Project Loans under RIDF

The project loans are made available to State Governments under RIDF for supporting rural infrastructure creation which stood at Rs.66,078 crore as on 31.3.2011.

b.Non-Project Loans

NABARD also provides loans to State Governments for contribution to the share capital of co-operative credit institutions.

2.1.5 Other Loans

Other loans are issued to Banks, Governments, NGOs and MFIs from various funds, viz., CDF, MFDEF, WDF and TDF.

2.2 Investments

NABARD invests portfolio surplus in Money Market instruments (CBLO, Short Term Deposits, Reverse Repo, Liquid Mutual Fund units) and Government Securities.

NABARD also invests in the equity of entities in the sphere of agriculture and rural development. It has equity stake in AFC, ADFCs, MCX, NCDEX and SIDBI. During the year NABARD increased equity in NCDEX

NABARD has equity in the subsidiaries viz. NABARD Financial Services Ltd (NABFINS), Agri-Business Finance (Andhra Pradesh), Agri Development Finance (Tamilnadu) and NABCONS. Equity of NABFINS was increased during the year.

3. Brief classification of the Funds

There are various Funds in the Balance Sheet of NABARD which are comprised of Funds contributed by RBI, GoI, appropriated from profit or constituted by gifts, grants and benefactions.

3.1 Statutory Funds Balance outstanding as on 31.10.2010

Capital Reserve (transferred entirely from ARDC) = Rs.74.80 crore

Reserve Fund (as per NABARD Act) = Rs. 6704 crore

Research and Development Fund (as per NABARD Act) = Rs.50 crore

National Rural Credit (Long Term Operations) Fund (as per NABARD Act) = Rs.14468 crore

National Rural Credit (Stabilisation) Fund (as per NABARD Act)= Rs.1577 crore

3.2 Funds Created by NABARD

Co-operative Development Fund (created by NABARD) = Rs.125 crore

Special Reserve Created & Maintained u/s 36(1)(viii) of Income Tax Act, 1961 (created by NABARD) = Rs. 4445 crore

Farm Innovation and Promotion Fund (created by NABARD) = Rs.50 crore

Tribal Development Fund (created by NABARD) = Rs.1054.51 crore

Farmers Technology Transfer Fund (created by NABARD) = Rs.101 crore

Investment Fluctuation Reserve (created by NABARD = Rs. 259 crore

3.2.1 New Funds created during the year

Producers Organization Development Fund- Corpus of Rs 50 Crore

Rural Infrastructure Promotion Fund Corpus of Rs 25 Crore

3.2.2 Funds Closed during the year and balance transferred to Reserve Fund

Foreign Currency Risk Fund - Rs,147.06 crore

Soft Loan Assistance Fund for Margin Money - Rs.10 crore

Agriculture & Rural Enterprise Incubation Fund - Rs.5 crore

3.3 Funds created with support from GoI, RBI, Banks and NABARD

Watershed Development Fund (created by GoI and NABARD) = Rs.1897 crore

Micro Finance Development and Equity Fund (created by GoI, RBI, Banks and NABARD) = Rs.139.12 crore

Financial Inclusion Fund (created by GoI, RBI and NABARD) = Rs.53.10 crore

Financial Inclusion Technology Fund (created by GoI, RBI and NABARD)= Rs.22.95 crore

3.4 Funds created as per agreement or out of reflows from bilateral assistance

Interest Differential Fund - (Forex Risk) (created as per agreement with KfW)= Rs.145 crore

Interest Differential Fund - (Tawa) (created as per agreement with KfW)= Rs.0.11 crore

Adivasi Development Fund (created as per agreement with KfW)= Rs.0.20 crore

National Bank - Swiss Development Coop. Project (created from reflows of funds from SDC)

Rural Innovation Fund (created from reflows of funds from SDC)

Rural Promotion Fund (created from reflows of funds from SDC)

KfW - Fund for Watershed Development (created from reflows of funds from KfW)

KfW - NABARD V Fund for Adivasi Programme (created from reflows of funds from KfW)

There are other funds which are Donor assisted project specific or Government programme specific and get extinguished with the completion or termination of the project. NABARD acts mainly as a pass through and monitoring agency [with or without service charges].

NPA Non Performing Assets stood at Rs.69.15 crore for which provision of Rs.32.90 was made during the year.

Capital adequacy CRAR as on 31.03.2011 works out to 21.78

4. Income and Expenditure

Income was received mainly from interest on loans and advances Rs.8169 crore (88% of total income) and from investment operations Rs.943 crore.

Expenditure was also on interest and financial charges on borrowings Rs.6194 crore. Establishment and other expenses were Rs.1120 crore - increase mainly because of Arrears Rs.277 crore and provision for Superannuation benefits Rs.216 crore. The average cost of borrowings for the year 2010-11 was Rs.6.64 which was less than that of previous year (Rs.6.83).

Profit before tax was Rs.1824 crore and Rs.1279 crore after provision of tax which was less than profit after tax of Rs.1558 crore for last year.