AR-Chapter 10.pdf

10 10.1 Sources of funds 10.2 Uses of funds 10.3 Income and expenditure 10.4 NABARD’s investments in the agriculture and rural ecosystem 10.5 Strategic investment and mobilisation for impact and growth Annexe to Chapter 10: Performance of NABARD subsidiaries in...

10 10.1 Sources of funds 10.2 Uses of funds 10.3 Income and expenditure 10.4 NABARD’s investments in the agriculture and rural ecosystem 10.5 Strategic investment and mobilisation for impact and growth Annexe to Chapter 10: Performance of NABARD subsidiaries in FY2024 Leveraging Finance for Growth ` ` ` `  Annual Report 2023–2­4 A s on 31 March 2024, NABARD reported a balance sheet size exceeding ₹9 lakh crore, marking a growth rate of 13.6% over FY2023, the high point of the year being the maiden issuance of social bonds pioneering environmental, social, and governance (ESG) investing in India (Showcase 10.1). Showcase 10.1: Maiden issue of social bond by NABARD ‘NABARD predates the concept of ESG investing and has, since inception, been focussed on sustainable development of the rural sector in India. Now, it’s on us to bring the Indian markets to the rural masses of India.’ —Chairman, NABARD, Shaji K.V. NABARD spearheaded the cause of ESG investment in the country by issuing India’s first rupee-denominated social bond this year. The listing ceremony was conducted at the historic Market Hall of the Bombay Stock Exchange on 29 September 2023. The ₹1,000 crore bond issue made NABARD one of the largest issuers in the Indian domestic market. Such was the enthusiasm that the offer received ₹8,560 crore in bids, of which ₹1,040.5 crore worth were accepted. This AAA rated bond was externally certified by KPMG under the social bond guidelines of the International Capital Markets Association. The funds raised through this offering will be used to Listing ceremony of social bond refinance drinking water projects under GOI’s Jal Jeevan Mission, financed under NIDA in Telangana. ESG = Environmental, Social, Governance; GOI = Government of India; NIDA = NABARD Infrastructure Development Assistance. 10.1 SOURCES OF FUNDS 10.1.1 Capital, reserves, and NRC funds NABARD’s balance sheet size has increased by 85.7%, from ₹4.9 lakh crore (FY2019) to ₹9.1 lakh crore (FY2024), at a compound annual growth rate (CAGR) of 13.2%. Our paid- up capital on 31 March 2024 stood at ₹17,080 crore, against an authorised share capital of ₹30,000 crore (Figure 10.1). At the close of FY2024, own funds (capital, reserves, and surplus) stood at ₹72,867 crore. NABARD contributed ₹1 crore each to the National Rural Credit (NRC) Long-Term Operation (LTO) Fund and the NRC (Stabilisation) Fund. NABARD’s balance sheet size has 10.1.2 Deposits increased by 85.7%, NABARD augmented various funds for different purposes over time by tapping into the priority from ₹4.9 lakh crore (FY2019) to sector lending shortfall of commercial banks. On 31 March 2024, the aggregate outstanding under ₹9.1 lakh crore such funds was more than ₹3 lakh crore, which is 33.2% of the total liabilities, including Short-Term (FY2024), at CAGR Cooperative Rural Credit Fund, Short-Term Regional Rural Bank deposits, Long-Term Rural Credit of 13.2%. Fund, and Rural Infrastructure Development Fund (RIDF) (Figure 10.1). 140  ` ` ` Leveraging Finance for Growth ` Figure 10.1: Sources of funds Share of funds by source (%) 4 8 2 4 8 22 2 20 FY2024 Own funds Total: 9,10,863 NRC (LTO) & NRC (Stabilisation) Funds FY2023 35 33 Deposits Total: 8,01,652 Borrowings in bond market 31 Borrowings from money market 31 Others (liabilities and funds) Funds by type of source (` crore) NRC (LTO) & NRC Own funds Deposits (Stabilisation) Funds 15,158 52 3,890 Total FY2023 FY2024 Total FY2023 FY2024 FY2023 FY2024 17,080 55,787 72,867 50,518 45,175 1,86,685 480 3,01,958 16,106 15,047 57 4,050 17,080 49,686 66,766 50,432 44,996 1,63,069 450 2,78,101 16,102 Capital STCRC Fund STRRB deposits LTRC Fund Tea, coffee & rubber deposits RIDF deposits Reserves & surplus WIF FPF Borrowings in the bond market Borrowings in the money market Others (liabilities and funds) 5,000 12,298 Total 552 0 Total Total FY2023 FY2024 FY2023 FY2024 23,630 2,508 FY2023 FY2024 8,197 1,60,621 57,667 48,810 2,86,151 52,113 94,007 28,270 2,01,083 24,501 32,698 5,000 1,755 18,386 1,942 19,172 7,818 1,21,148 57,666 48,810 1,755 2,46,677 42,538 77,455 1,64,081 22,107 29,925 3,675 12,298 910 Bonds and debentures Tax free bonds Certificates of deposit Borrowings for JNN Solar Other liabilities Bonds f or LTIF Bonds for PMAY-G Commercial papers Mission (FY2023: `3 cr, Other funds T erm money borrowings FY2024: `3 cr) Bonds for SBM-G Bonds for MIF T erm loans from banks TREPS & Repo Foreign currency loan Borrowings against ST deposits cr = crore, FPF = Food Processing Fund, JNN Solar Mission = Jawaharlal Nehru National Solar Mission, LTIF = Long-Term Irrigation Fund, LTO = Long-Term Operations, LTRC = Long-Term Rural Credit, MIF = Micro-Irrigation Fund, NRC = National Rural Credit, PMAY–G = Pradhan Mantri Awaas Yojana–Gramin, RIDF = Rural Infrastructure Development Fund, SBM–G = Swachh Bharat Mission–Grameen, ST = Short-Term, STCRC = Short-Term Cooperative Rural Credit, STRRB = Short-Term Regional Rural Bank, TREPS = Tri-party Repo Dealing & Settlement, WIF = Warehouse Infrastructure Fund. 141  Annual Report 2023–2­4 NABARD raised The Government of India (GOI) allocated ₹40,475 crore for RIDF in FY2024. Through the funds for shoring financial year, NABARD mobilised ₹49,730 crore and repaid ₹25,598 crore in various tranches up GLC for rural production and under RIDF deposits. investment, NABARD also mobilised ₹100 crore and repaid ₹70 crore under Food Processing Fund (FPF) infrastructure creation, deposits during the FY2024. The outstanding deposits at the end of FY2024 was ₹3,890 crore under social sector Warehouse Infrastructure Fund (WIF) and ₹480 crore under FPF. development, cash and investment management, and 10.1.3 Borrowings as on 31 March 2024 creation of fixed Total mobilised corpus stood at ₹3.5 lakh crore and the total outstanding borrowings of NABARD assets. were ₹4.9 lakh crore. Commercial papers, term loans, and non-convertible debentures formed 94% of the total borrowing portfolio of NABARD. Borrowings in the bond market During FY2024, bonds of ₹65,393 crore were issued and ₹25,920 crore were redeemed. The outstanding under bonds and debentures increased by 32.6% over FY2023. During FY2024, no mobilisation took place under the Extra-Budgetary Resources scheme of the GOI. As a result, outstandings against bonds raised for GOI schemes remained the same as last year. Borrowings in the money market During the year, NABARD issued commercial papers to raise ₹1.3 lakh crore. Term loans worth ₹82,450 crore were borrowed from commercial banks through the financial year. 10.2 USES OF FUNDS NABARD raised funds during FY2024 to finance its development agenda that included shoring up ground level credit (GLC) for rural production and investment, infrastructure creation, social sector development, cash and investment management, and creation of fixed assets (Figure 10.2). NABARD provides loans and advances to rural financial institutions for increasing GLC to farmers for financing of their short-term seasonal agricultural operations as also for investing in capital formation for carrying out various farming activities. Refinance is also available for purposes like working capital loans for weavers and artisans, marketing support under various lines of credit, and for conversion of short-term loans into medium-term loans in case of natural calamities. In addition, NABARD provides loans for infrastructure creation, social sector development, warehousing activities, food processing, etc., to various entities, including state governments and state-owned corporations. NABARD lends directly to state governments under NRC (LTO) for contributing to the share capital of cooperative credit institutions. These funds are utilised for cash and investment management and creation of fixed assets for running business operations. 142  ` ` ` Leveraging Finance for Growth ` Figure 10.2: Uses of funds Share of funds by use (%) 01 7 12 0 8 8 1 Cash and investments FY2024 Refinance to enhance GLC for 29 30 Total: 9,10,863 agricultural production and investment FY2023 Infrastructur e creation loans 53 Social sector investments Total: 8,01,652 Others 51 Fixed assets and other assets Funds by type of use (` crore) Refinance to enhance GLC for agricultural Fixed and Cash and investments production and investment other assets Total 20,504 552 Total 7,455 FY2023 FY2024 FY2023 FY2024 FY2023 FY2024 8,576 29,899 69,694 1,07,048 1,58,706 2,68,248 20,583 4,68,593 1 16,092 13,956 373 5,815 48,320 280 64,692 4,24,642 1,40,913 2,52,039 17,355 6 Cash and bank balance Production and mark eting credit MT & LT project loans Government securities and Direct refinance to DCCBs GCF other investments PODF Credit facility to federations T ri-party repo lending Infrastructure creation loans Social sector investments Others 32,404 431 802 Total FY2023 FY2024 12,298 Total FY2023 FY2024 FY2023 FY2024 5 Total 1,70,007 53,617 3,037 2,65,192 48,819 61,117 332 337 1,508 3,386 4,091 562 12,298 31 1,54,070 53,966 2,45,017 48,819 61,117 338 369 1,500 27,890 2,516 422 Other loans (including PMAY–G RIDF DIDF LTIF NIDA SBM–G JNN Solar Mission) FPF WIF FIDF MIF LT non-project loans DCCB = District Central Cooperative Bank, DIDF = Dairy Processing and Infrastructure Development Fund, FIDF = Fisheries and Aquaculture Infrastructure Development Fund, FPF = Food Processing Fund, GCF = Green Climate Fund, GLC = Ground Level Credit, JNN Solar Mission = Jawaharlal Nehru National Solar Mission, LT = Long-Term, LTIF = Long-Term Irrigation Fund, MIF = Micro-Irrigation Fund, MT = Medium-Term, NIDA = NABARD Infrastructure Development Assistance, PMAY–G = Pradhan Mantri Awaas Yojana– Gramin, PODF = Producers’ Organisation Development Fund, RIDF = Rural Infrastructure Development Fund, SBM–G = Swachh Bharat Mission–Grameen, WIF = Warehouse Infrastructure Fund. Note: MT & LT project loans include the amount subscribed to special development debentures of state cooperative agriculture and rural development banks, which are in the nature of deemed advances. 143  Annual Report 2023–2­4 Highlights of deployment of funds and year-on-year growth, as on 31 March 2024, against various loans and advances extended by NABARD are given in Figure 10.3. Figure 10.3: Shoring up GLC through refinance: Status as on 31 March 2024 Credit under direct lending window to DCCBs Total loans and advances at 8 lakh crore in grew at 46.9% to 20,504 crore in FY2024. FY2024, growing 8.8% over FY2023. MT and LT project loans had the highest share of Resources available for lending at the 33.7% in total loan and advances. Production and grassroots scaled up by 12.6% as ST (SAO) marketing credit accounted for around 20%. and ST (OSAO) (production and marketing These two items recorded high growth and high credit) outstanding reached 1.6 lakh crore share in assets. in FY2024. CFF stood at 20,583 crore on 31 March 2024 ST (SAO) to StCBs stood at 89,765 crore recording a growth of 18.6% over FY2023. (72.8%), RRBs at 33,367 crore (27.1%), and SCARDBs at 100 crore (0.1%). MT and LT investment loans provided by banks reached 2.7 lakh crore, growing 6.4% over FY2023. ST (OSAO) of 35,474 crore was shared across StCBs (71.8%), RRBs (28%), and SFBs (0.22%). CFF = Credit Facility to Federations, DCCB = District Central Cooperative Bank, GLC = Ground-Level Credit, LT = Long-Term, MT = Medium-Term, RRB = Regional Rural Bank, SCARDB = State Cooperative Agriculture and Rural Development Bank, SFB = Small Finance Bank, StCB = State Cooperative Bank, ST (OSAO) = Short-Term Other Seasonal Agricultural Operations, ST (SAO) = Short-Term Seasonal Agricultural Operations. Note: The amounts shown are outstanding figures. Figure 10.4: Social sector investments as on 31 March 2024 Exposure of Loans outstanding of 48,819 crore 12,298 crore under under PMAY–G extended to NRIDA SBM–G (5.4% of assets) NRIDA = National Rural Infrastructure Development Agency, PMAY–G = Pradhan Mantri Awaas Yojana–Gramin, SBM–G = Swachh Bharat Mission–Grameen. Note: The amounts shown are outstanding figures. 144  ` ` ` Leveraging Finance for Growth ` Figure 10.5: Infrastructure finance as on 31 March 2024 ` ` ` Loans for RIDF projects (20% of assets): 1.7 lakh crore as on 31 March 2024, A growing 10.3 % over last year. ` ` ` ` NIDA loans 32,404 crore in FY2024, growing 16.2% over last year. A ` ` ` LTIF loans at 53,617 crore as on 31 March 2024. B ` ` ` Other infrastructure loans at 8,732.5 crore (i.e., WIF 3,385.9 crore, DIDF 1,508.2 crore, MIF 3,036.9 crore, and FIDF 801.5 crore) as on 31 March 2024, recording a growth of 0.7%. C ` ` ` GCF loans at 552 crore, growing 48% over FY2023, seeding green growth. C DIDF = Dairy Processing and Infrastructure Development Fund, FIDF = Fisheries and Aquaculture Infrastructure Development Fund, GCF = Green Climate Fund, LTIF = Long-Term Irrigation Fund, MIF = Micro-Irrigation Fund, NIDA = NABARD Infrastructure Development Assistance, RIDF = Rural Infrastructure Development Fund, WIF = Warehouse Infrastructure Fund. Note: The amounts shown are outstanding figures. Figure 10.6: Investment of surplus funds as on 31 March 2024 Short-term surplus deployed in various financial instruments, including deposits with banks, stood at 92,284 crore. 75.5% was deployed in government securities and 22,590 crore was kept in the form of short-term bank other financial instruments. deposits to meet liquidity and contingency requirements. Note: The amounts shown are outstanding figures. 145  Annual Report 2023–2­4 10.3 INCOME AND EXPENDITURE NABARD earned NABARD earned ₹48,847 crore income during FY2024, i.e., a 24% hike over FY2023 (Figure 10.7). ₹48,847 crore Profit before tax in FY2024 was ₹8,068 crore (against ₹6,555 crore in FY2023) and profit after income during tax was ₹6,103 crore (against ₹5,360 crore in FY 2023). The net surplus has been appropriated by FY2024, a 24% hike transferring to various funds maintained in NABARD such as the R&D Fund, Reserve Funds, NRC over FY2023. (LTO) Fund, and NRC (Stabilisation) Fund, etc. Figure 10.7: Income analysis Gross income ( crore) Profit before tax ( crore) Profit after tax ( crore) 8,068 6,103 5,082 5,360 48,847 6,693 6,555 39,331 36,761 FY2022 FY2023 FY2024 4 3 22 FY2022 FY2023 FY2024 2 2 FY20 FY20 0 FY2 Capital-to-risk (weighted) Business per employee ( crore) Net profit per employee ( crore) assets ratio (%) FY2024 138.4 16.89 1.9 119.1 113.7 FY2023 FY2023 FY2022 FY2023 FY2024 1.7 16.45 16.07 FY2022 FY2022 FY2024 1.6 10.4 NABARD’S INVESTMENTS IN THE AGRICULTURE AND RURAL ECOSYSTEM NABARD collaborates with strategic partners through equity investments to support the development of the agriculture and rural ecosystem, including enhancing the credit flow. 10.4.1 Investment in NABARD subsidiaries NABARD has seven subsidiaries established to further its mandate (see Annexe to Chapter 10). The subsidiaries contribute significantly in supporting NABARD’s objectives and expanding the impact in rural and agricultural development through financing micro-, small-, and medium-sized enterprises, farmer producers’ organisations, self-help groups, and joint- liability groups. They do so by extending micro-credit facility, providing credit guarantee, investing in rural start-ups, providing consultancy, and innovating in rural development and allied areas. 146  ` ` ` Leveraging Finance for Growth ` The total investment in the share capital of the seven subsidiaries stood at ₹604.7 crore as on 31 March 2024 (Figure 10.8). NABARD received a dividend of ₹7.5 crore from NABKISAN Finance Limited, ₹2.3 crore from NABSAMRUDDHI Finance Limited, ₹10.2 crore from NABFINS Limited, and ₹0.1 crore from NABARD Consultancy Services Private Limited in FY2024. Figure 10.8: Shareholding in subsidiaries of NABARD (₹ crore) Year of inception 1997 Share capital ( crore) 123.8 Shareholding of NABARD (%) 91.1 Year of inception 2003 Investment by NABARD ( crore) 145.1 Share capital ( crore) 5.0 Shareholding of NABARD (%) 100.0 Year of inception 2018 Investment by NABARD ( crore) 5.0 Share capital ( crore) 25.0 Shareholding of NABARD (%) 100.0 Investment by NABARD ( crore) 25.0 Year of inception 1997 Share capital ( crore) 161.7 Shareholding of NABARD (%) 63.1 Year of inception 2019 Investment by NABARD ( crore) 102.0 Share capital ( crore) 50.0 Shareholding of NABARD (%) 100.0 Investment by NABARD ( crore) 50.0 Year of inception 1997 Share capital ( crore) 171.5 Shareholding of NABARD (%) 87.8 Year of inception 2020 Investment by NABARD ( crore) 227.6 NABFOUNDATION Share capital ( crore) 50.0 Shareholding of NABARD (%) 100.0 Investment by NABARD ( crore) 50.0 Note: NABKISAN and NABSAMRUDDHI figures include premium. 10.4.2 Strategic investments and returns NABARD has strategically invested in equity of companies involved in agriculture and rural development sectors. These investments aim to support institutions that contribute to agricultural and rural development, whether through direct interventions or indirectly by mitigating agriculture risks, facilitating market access, providing essential digital services, upgrading skills, and improving credit accessibility through specialised institutional mechanisms. 147  Annual Report 2023–2­4 Till 31 March 2024, NABARD had invested ₹1,106.2 crore in ten companies operating in the agriculture and rural development space. During FY2024, NABARD received a dividend of ₹23.7 crore from four companies, namely, Small Industries Development Bank of India (20%, ₹10.6 crore), Agriculture Insurance Company of India Limited (20%, ₹12 crore), Multi Commodity Exchange of India Limited (191%, ₹0.7 crore), and Common Service Centres e-Governance Services India Limited (6%, ₹0.3 crore). Table 10.1: Strategic investments and returns S. No. Company Year of NABARD’s Stake (%) investment investment (₹ crore) 1 AFC India Ltd. FY2000 1.0 6.7 2 Agriculture Insurance Company of India Ltd. FY2004 60.0 30.0 3 Small Industries Development Bank of India.* FY2003 & FY2018 966.3 9.4 4 National Commodity and Derivatives Exchange Ltd.* FY2004 16.9 11.1 5 Multi Commodity Exchange of India Ltd. FY2006 0.3 0.7 6 CSC e-Governance Services India Ltd.* FY2016 9.8 9.4 7 National E-Governance Services Ltd. FY2017 1.5 2.0 8 Agriculture Skill Council of India FY2017 0.0 4.0 9 National E-Repository Ltd. FY2018 10.5 13.0 10 Open Network for Digital Commerce FY2022 & 2024 40.0 5.3 TOTAL 1,106.2 * Figures include premium. Note: Components may not add up to total due to rounding off. 10.4.3 Investing in alternate investment funds NABARD is contributing to Alternate Investment Funds (Securities and Exchange Board of India-registered) to encourage entrepreneurship in existing or new activities for catering to agriculture and rural development, to facilitate development of income-generating sustainable units for replication by rural entrepreneurs, and to promote technological innovations and technology dissemination in agricultural and rural sectors. As on 31 March 2024, the total commitment by NABARD stood at ₹729 crore in 31 funds vis-à- vis a commitment of ₹634 crore in 25 funds as on 31 March 2023. During FY 2024, NABARD has committed ₹95 crore to 6 funds. An amount of ₹503.3 crore has been disbursed. The funds drew a total of ₹103.2 crore and refunded a capital of ₹15.1 crore during the year with a capital gain of ₹7.1 crore and other income, including a dividend of ₹5.7 crore. 10.4.4 Other initiatives A seminar on ‘Harnessing Opportunities: NABARD transforming Agri-Landscape’ was organised on 6 March 2024 at Mumbai to provide a common platform for venture capitalists, industry experts, chief executive officers (CEOs) of incubation centres, agri-start-up founders, and incubatees to discuss the challenges and issues faced by agri-start-ups. 148  ` ` ` Leveraging Finance for Growth ` In order to develop synergies between NABARD operations and functioning of portfolio NABARD expects to companies, NABARD, together with NABVENTURES, organised a meet of these companies. leverage forward- Towards effective corporate governance in subsidiaries, NABARD organised a workshop on looking investment opportunities in Capacity Building of Nominee Directors/Managing Directors/CEOs of its subsidiaries on agri-exports, value 31 July 2023 at National Bank Staff College, Lucknow. chain financing, renewable energy, and climate 10.5 STRATEGIC INVESTMENT AND MOBILISATION FOR IMPACT AND change adaptation. GROWTH NABARD has been focusing on financing development activities and maintaining a well-diversified, expanding, and well-performing asset base. Towards sustainable development of rural areas, NABARD has issued social bonds to be used to refinance drinking water project financing. This diversification is a sign of NABARD’s deepening commitment to social and other developmental projects with the aim of transforming India into a developed country by 2047. In the coming years, NABARD expects to further leverage forward-looking investment opportunities in agri-exports, value chain financing, renewable energy, and climate change adaptation, amongst others. 149