During 2001-02 and 2004-05, Nabard has raised a total of Rs 10,642.19 crore through multiple instruments. The internal generation of surpluses by Nabard to plough back the same into refinance operations, has also been constrained as it has to pay income tax since 2001-02. Income tax of Rs 390 crore in 2001-02, Rs 438.34 crore in 2002-03, Rs 386.21 crore in 2003-04 and Rs 426 crore in 2004-05 was paid.
Nabards refinances stood at Rs 28,000 crore of which it has raised Rs 15,000 crore through bonds and the balance Rs 13,000 crore would have to be mobilised.
Nabard proposes to borrow through the corporate bond route where the interest rates are such that it would have to provide refinance at negative spreads to make it attractive to client banks.
This approach would not be a viable proposition and the investors in Nabard bonds may have second thoughts. In the light of constraints to plough back internal resources into refinance operations, it has also appealed to the centre and the Reserve Bank of India (RBI) to increase the paid-up capital to Rs 5,000 crore from the present level of Rs 2,000 crore over a period of five years.