The National Bank for Agriculture and Rural Development (Nabard) may not issue tax-free bonds this fiscal, according to two sources who confirmed that the company has received a communication from the government regarding the same.
The sources said the company received the letter a few days back, indicating it will not be permitted to issue any tax-free bonds this fiscal year.
“We have received a communication from the government indicating we may not be permitted to issue tax-free bonds in this fiscal year. As of now, we have not decided to send a request again. Most of our funding requirements are met by the corporate bond and the commercial paper market,” said one of the sources.
Nabard chairman Harsh Kumar Bhanwala could not be immediately contacted.
On Friday, Nabard postponed its three-year bond issue through which it was planning to raise Rs 2,000 crore. “The lowest bid stood at 8.30% while we were targeting a coupon rate close to 8.20%. We may come back to the market next week,” the source said. Prior to this, Nabard had issued five-year bonds at 8.37% to raise Rs 2,000 crore on June 22.
In FY15, the company raised Rs 9,850 crore through the bond market and, this fiscal, the borrowing target may be in the range of Rs 10,000-15,000 crore, according to the source. The company’s primary area of operations is in refinancing of agriculture loans and lending to rural infrastructure projects of state governments.
The government re-introduced tax-free bonds this financial year for projects in roads, railways and irrigation sector after a gap on FY15.
Tax-free bonds were introduced in 2011-12 with an overall limit of Rs 30,000 crore to boost infrastructure spending. Select state-owned companies like Rural Electrification Corporation (REC) and Power Finance Corporation (PFC) were allowed to issue these bonds.
In 2012-13, the limit was doubled to Rs 60,000 crore. However, companies raised just Rs 18,000 crore through these bonds. In FY14, the limit was kept at Rs 50,000 crore against which companies borrowed Rs 49,200 crore.
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