MUMBAI – National Bank for Agriculture and Rural Development aims to grow its balance sheet to 8.75 trln rupees by the end of 2022-23 (Apr-Mar) from 7.57 trln rupees as on Mar 31, an increase of nearly 16%, Chairman G.R. Chintala told reporters today.
In 2021-22, NABARD's balance sheet grew by 15.1%, driven by its loan portfolio that increased 12.9% on year to 6.81 trln rupees. Loan disbursals rose 7.73% on year to 3.8 trln rupees as on Mar 31.
The share of long-term finance–investment credit–stood at 2.4 trln rupees, or 35.2% of loan portfolio, up from almost 2 trln rupees a year ago that suggests greater allocation for capital formation in the rural sector.
When asked about the readiness to shift to Basel III norms as mandated by the Reserve Bank of India, Chintala said while it was expected to have come into effect from April, so far there has been no further communication from the central bank. He said it is likely that Basel III norms come into effect from April 2023.
The bank aims to borrow 450 bln rupees via issuance of bonds in 2022-23, largely similar to 444.15 bln rupees borrowed via this route in 2021-22.
Chintala expressed hope that the exit of a large non-bank borrower from the markets would likely work in favour of large borrowers like NABARD by further reducing their cost of funds. He may be referring to Housing Development Finance Corp which recently announced its merger with HDFC Bank.
Chintala said that while long tenor funds were getting costlier due to changes in interest rates in the system and liquidity tweaks by the RBI, the cost of short-term borrowings remains nearly unchanged.
While he does not see any impact on crop lending rates due to tighter liquidity as that is linked to non-market sources such as priority sector deposits and Rural Infrastructure Development Fund, Chintala agreed that longer tenor non-crop loans may see a rise in cost.
Gross borrowing is pegged at 3.5-3.6 trln rupees in 2022-23.
NABARD’s non-performing asset level was 0.30% or 20.6 bln rupees. Although slightly up from 0.21% a year ago, Chintala said this ratio was the lowest among all India financial institutions and these bad loans were fully provided for.
On the issue of regional rural banks, NABARD issued 31.97 bln rupees of recapitalisation for such lenders. NABARD is the nodal agency for regional rural banks that are co-owned by a bank, a state government and central government. Of the 81.86 bln rupees meant to be infused into these lenders, the central government has contributed its share of 40.84 bln rupees.
A government appointed committee that Chintala was also part of has recommended a common information technology platform that can be accessed by these regional rural banks.
He added that NABARD was set to draft a viability plan for all the regional rural banks and get into granular planning based on region and sector that they are present in.
Over time, one of the recommendations is that these regional rural banks consider listing on exchanges to source fresh capital.
As per the law governing regional rural banks, these lenders have to remain confined to the state they are in and can’t transition into small finance banks, which is an option available for urban co-operative banks. For any such change, the government will have to repeal or change the law, Chintala said.
Put together, the asset size of all regional rural banks would be almost 8 trln rupees.
Against assumptions of stress in cooperative bank sector, Chintala said of the 34 state co-operative banks, just one or two have faced issues while of the 364 district co-operative banks, 10-20 may have an issue.
To address these issues and improve supervision, NABARD is computerising the supervisory process, which will eventually be verified through a physical process by the staff.
After a recent study on farm loan waivers that pushed for a more granular approach to rural distress, NABARD is looking at a crop and region-based pilot study which will also include various other parameters such as weather, crop patterns and analytics.