Departments

Finance Department

The functions of this Department are (a) to mobilise resources through various instruments to meet the fund requirements of NABARD, (b) remittance of funds to Regional Offices and client institutions (Commercial Banks, Regional Rural Banks, State Cooperative Agriculture and Rural Development Banks, State Cooperative Banks, District Central Cooperative Banks and State Governments) directly or through Regional Offices and (c) investment of temporary surpluses and other funds in appropriate avenues. These activities are carried out within the framework of regulatory and other guidelines.

A Mobilisation of Resources

Resources are mobilised as per Bank’s requirements through a mix of instruments of various types and tenure (Bonds¹, Certificate of Deposits², Commercial Papers³, Term Deposits, Corporate Borrowings, Term Money Borrowings⁴, RIDF⁵ deposits, STCRC⁶ deposits etc.). Of the bond issuances, three bonds were issued to retail investors, viz., Capital Gains Bonds⁷, NABARD Rural Bonds⁸ and Bhavishya Nirman Bonds⁹. These issues are now not open for fresh investments.

Bonds, Certificate of Deposits and Commercial Papers were issued after obtaining ratings from one of the approved credit rating agencies viz., CRISIL, ICRA or CARE. Bhavishya Nirman Bonds, which are zero coupon bonds with a tenure of 10 years, were rated by at least two credit rating agencies. NABARD’s issuances received ‘AAA’ or equivalent ratings from the credit rating agencies.

The names and addresses of these agencies are given below:

Rating Agencies

1) CRISIL Limited

CRISIL House, Central Avenue,

Hiranandani Business Park

Powai, Mumbai – 400 076

Phone: 022-33423361

www.crisil.com

2) ICRA Limited

3rd floor Electric Mansion,

Appasaheb Marathe Marg,

Prabhadevi,

Mumbai 400 025

Phone:022-30470000

www.icra.in

3) Credit Analysis & Research Ltd.

4th Floor, Godrej Coliseum

Somaiya Hospital Road,

Sion (East)

Mumbai- 400 022

Phone : 022-6754 3534.

www.careratings.com

The bonds issued to institutional investors are listed on NSE while Bhavishya Nirman Bonds are listed on BSE.

Registrar and Transfer Agents

The servicing of retail instruments (viz., Capital Gains Bonds, NABARD Rural Bonds and Bhavishya Nirman Bonds) is done by M/s.UTI Infrastructure Technology And Services Ltd., who are Registrars and Transfer Agents. The Corporate Bonds are serviced by M/s Datamatics Financial Services Ltd.

Investors may contact the following persons in case of need :

For Retail Instruments related queries

Shri Sunil Bhoite

M/s.UTI Infrastructure Technology and Services Ltd.

Plot No. 3, Sector 11, CBD Belapur

Navi Mumbai, (India)-400614

Phone: 022-67931043

Email:nabard@utitsl.co.in

For Corporate Bond related queries

Shri Amit Banerjee

M/s Datamatics Financial Services Ltd.

Plot No.A16 & 17, MIDC,

Part B Cross Lane, Andheri (East),

Mumbai – 400 093

Phone : 022-66712001-06/ 66712200

Fax No.022-66712011

Email:amit_banerjee@dfssl.com

The following persons could also be contacted in case of need :

For Retail issuances (Capital Gains Bonds, NABARD Rural Bonds & Bhavishya Nirman Bonds) :

For Corporate issuances :

Debenture Trustees

IDBI Trusteeship Services Ltd. are the Trustees for Bonds and Bhavishya Nirman Bonds. Their address and contact details are as under :

Smt. Brindha Venkatraman

Vice President

IDBI Trusteeship Services Ltd.

Asian Building, Ground Floor,

17, R.Kamani Marg, Ballard Estate,

Mumbai 400 001

Phone: 022-40807000

Email: itsl@idbitrustee.co.in

Hedging¹⁰ of foreign currency loans, (Loans availed from KfW¹¹ for Umbrella Programme on Natural Resource Management (UPNRM) is done through banks with whom International Swaps and Derivatives Association (ISDA)¹² agreements have been entered into.

B Remittance of Funds

The remittance of funds to Regional Offices and client institutions directly or through Regional Offices is looked after by the following persons of Finance Department:

Remittance of funds for Loaning Operations :

Remittance of funds for meeting Administrative Expenses :

C Treasury

The main function of the Treasury wing of the Finance Department is to ensure availability of adequate liquidity resources, i.e. cash, for the business operations and administrative functions of the Bank. The Treasury also invests the Bank’s temporary surpluses and other funds in various instruments in accordance with the provisions of NABARD Act, RBI guidelines and directions given by the Investment Committee (consisting of Executive Directors) and the Board of Directors.

The instruments for investment, in broad terms, are:

0. • Money Market instruments which are mainly short-term, marketable, liquid, low-risk debt securities. These are Treasury Bills¹³ (including Cash Management Bills), Money Market Mutual Funds¹⁴, Commercial Papers3, Certificates of Deposits2.

0. • Collateralised Borrowing and Lending Obligation (CBLO)¹⁵

0. • Government Securities¹⁶ (Central Government and State Government)

0. • Deposits with banks

0. • Corporate Bonds (NCDs)¹⁷

0. • Equity Shares

0. • Other products such as Bills Rediscounting¹⁸, Units of Venture Capital Funds, Reverse Repo.

0. • Any other instrument, approved by RBI as eligible instrument for Financial Institutions like NABARD to invest

0. • The investments are made both in primary and secondary markets.

0. • Investment in Venture Capital Funds

Encouraging entrepreneurship, innovation, growth and investment in agriculture and rural development.

Contact details of the officials engaged in Treasury Operations:

Contact details :

Officer in-charge

Glossary

1. Bonds

A bond is a formal contract to repay borrowed money with interest at fixed intervals. Thus a bond is like a loan: the holder of the bond is the lender (creditor), the issuer of the bond is the borrower (debtor), and the coupon is the interest.

2. Certificate of Deposits (CD)

Certificate of Deposits are short term money market instruments, issued at discount, for a specified amount and maturing on a specific date. These can be issued by banks and All India Financial Institutions (AIFIs). The maturity period of CDs issued by banks should not be less than 7 days and not more than one year, from the date of issue. The AIFIs can issue CDs for a period not less than 1 year and not exceeding 3 years from the date of issue.

3. Commercial Paper (CP)

Commercial Paper is a short term money market instrument, issued at discount, for a specified amount and maturing on a specific date. These have maturity of 15 days to 1 year and are issued by highly rated corporate, PDs and All India Financial Institutions.

4. Term Money Borrowings (TMB)

Term Money Borrowing is an over-the-counter product between a lender and a borrower. The eligible investors are Commercial Banks including Regional Rural Banks and Co-operative Banks. The instrument is non-transferable. The tenor of the borrowing is 03 to 06 months. The issuer is free to fix the interest rates. The minimum application amount (Face value) is Rs.10 Lakhs.

5. Rural Infrastructure Development Fund (RIDF)

Rural Infrastructure Development Fund was instituted in NABARD during 1995-96. The main objective of the Fund is to provide loans to the State Governments and State owned Corporations to enable them to complete ongoing rural infrastructure projects. Commercial Banks contribute to this fund as per allocation made by the Reserve Bank of India.

6. Short Term Cooperative Rural Credit (Refinance) Fund (STCRC)

With a view to augmenting NABARD’s resources for short term credit facilities to Cooperative Institutions, the Short Term Cooperative Rural Credit (Refinance) Fund was set up in 2008-09 with contributions by scheduled commercial banks not achieving their priority sector obligations.

7. Capital Gains Bonds

NABARD had issued Capital Gains Bonds during the period from October 2000 to March 2009 with 5/7 years tennure, under Sec 54-EC of IT Act,1961. The bonds had Semi-annual, Annual and Cumulative options for payment of interest. Semi-annual interst is payable on 01 April & 01 October every year. Due date for Annual interest payment is 01 April.

8. NABARD Rural Bonds

NABARD issued Rural Bonds under Sec. 80 C of the IT Act,1961 from January 2008 to March 2009. The bonds have maturity period of 5 years with interest payment option of Annual or Cumulative. The annual interest is being paid on 31 July of every year.

9. Bhavishysa Nirman Bonds

Bhavishya Nirman Bonds were issued during the period from March 2007 to March 2011. These are 10 year Zero coupon bonds issued under Section 2(47) & 2(48) of Income Tax Act, 1961. The bonds have face value of Rs. 20,000/- each and are issued at discounted price. The bonds do not carry any interest. The gains on maturity are treated as long term capital gains and taxed accordingly. The bonds are tradable on Bombay Stock Exchange.

10. Hedging

Hedging means reducing or controlling risk. This is done by taking a position in the futures market that is opposite to the one in the physical market with the objective of reducing or limiting risks associated with price changes. In other words, a hedge consists of taking an offsetting position in a related security, such as a futures contract. An example of a hedge would be if you owned a stock, then sold a futures contract stating that you will sell your stock at a set price, therefore avoiding market fluctuations.

11. KfW loans

KfW stands for Kreditanstalt fur Wiederaufbau. It is a German Development Bank which provides loans and grants to NABARD under various programmes undertaken for the development of farm sector in India.

12. International Swaps and Derivatives Association (ISDA)

International Swaps and Derivatives Association is a trade organization of participants in the market for over-the-counter derivatives. It is headquartered in New York and has created a standardized contract (the ISDA Master Agreement) to enter into derivatives transactions. its membership consists of derivatives dealers, service providers and end users.

13. Treasury Bills

Treasury Bills are short-term (maturities less than one year), discounted, government securities. The present issues of T-bills are for 91-day, 180-day and 364-day. Treasury bills are sold through an auction process by RBI at a discount to its face value.

14. Money Market Mutual Funds

Money market mutual funds (such as Liquid Funds and Liquid Plus funds) invest in money market instruments. A money market fund is a mutual fund that invests solely in money market instruments. The goal of a money-market fund is to preserve principal while yielding a modest return.

15. Collateralized Borrowing and Lending Obligation (CBLO)

“Collateralized Borrowing and Lending Obligation (CBLO)", is a collateralized and secured instrument for borrowing / lending money. CBLO is a discounted instrument traded on Yield Time priority. CBLO instruments generally made available for trading are those with maturity of next seven business days and three month end dates.

16. Government Securities:

Government Securities are coupon-bearing debt instruments issued by the Government of India/ State Governments. Government Securities may have a fixed or a floating coupon. The maturity of the securities can be for maximum 30 years. Government securities are issued by RBI through auction process at market-related yield. Banks, FIs, LIC, mutual funds are the major participants.

17. Non-Convertible Debentures (NCD)

Non-convertible Debentures are debt instruments issued by corporate including, PDs, PSUs and FIs. These bonds are generally issued for a specific period. The bonds may carry fixed or floating coupon and are listed on exchanges. A few institutions issue bonds which are perpetual in nature.

18. Bills Re-Discounting Scheme (BRDS).

Bills Rediscounting means the rediscounting of trade bills, which have already been purchased by/discounted with the bank by the customers. These trade bills arise out of supply of goods/services.