Nabard ropes in consultancy firms to reposition self

Written by Sanjay Jog | Mumbai | Updated: Feb 4 2009, 04:48am hrs
National Bank for Agriculture and Rural Development (Nabard) has kicked off an exercise to reposition itself.

The apex development bank has held talks with leading consultants such as Mckinsey, Ernst & Young, KPMG, Rabo Bank, BCG and Deloitte to prepare a road map to implement its plan to set up direct financing subsidiary, develop infrastructure delivery as independent business and link various development initiatives to generate business in a credit plus approach. Besides, Nabard plans to set up an independent supervisory board as at present 89 of 402 cooperative banks are licensed. Further, it proposes to segregate Nabcons (Nabard Consultancy) as an independent subsidiary. The bank may also hive it off as an independent subsidiary once gross income touches Rs 40 crore.

Nabard is keen to start the above given initiatives under its repositioning plan by 2010. The sub-committee will select one of consultants and to invite RFP for the preparation of a road map and its implementation, sources said.

As reported by FE, in a bid to cash in on the opportunities in the burgeoning micro finance business, Nabard proposes to set up independent micro-finance and financial inclusion unit and has sought support from the Centre and RBI to raise affordable funds for state governments and other stakeholders.

The direct financing subsidiary is under consideration as ground-level credit (GLC) flow is expected to grow from Rs 1,96,000 crore in 2008 to Rs 11,17,000 crore by 2018. The bank will explore the option of direct finance area-based projects by creating or taking over branch network. Besides area-based projects, Nabard can finance value chains and venture capital financing. Moreover, Nabard has realised that its capacity to influence direction of rural credit is getting marginalised and thus in a bid to provide focussed attention it proposes to set up refinance unit as an independent unit. Nabard would need a dedicated fund to support at at least 35% of its operationsRs 28,000 crore by 2018, sources said.

The bank is also reportedly looking at access to sources of cost-effective funds like India Infrastructure Finance Company and also in a position to procure bilateral/multilateral funding agency loans. Nabard is ready to negotiate MoUs with various infrastructure funding agencies such as KfW, JBIC, ADB, World Bank, IDFC, IL&FS, ITC Agro, Mahindra.