In a first-of-its-kind borrowing instrument, the National Bank for Agriculture and Rural Development (Nabard) has said it will be listing the first of its social bonds on September 29 with a size of Rs 3,000 crore.
“This is the first by an AAA-rated entity. It will be followed by sustainability and green bonds. Climate and sustainability are very important. We have recently set up an exclusive vertical to take care of the needs of these sectors,” Nabard Chairman Shaji KV has said.
Though the market is agog with reports that the bank will come out with such new borrowing instruments to finance projects in the sustainability, green, and social sectors, this is the first time that it has indicated a specific timeline for rolling out the bonds.
Shaji was in Hyderabad to take part in the national conference on millets, organised by businessline and Nabard last week.
He said the Nabard might go for borrowings to the tune of ₹3-4 lakh crore in the current financial year. “It will be spaced out and governed by SEBI regulations,” he said.
Sustainability Bond Framework
The bank recently announced a Sustainability Bond Framework, which seeks to finance and refinance new or existing eligible green and social projects. The key criteria to make a project eligible to get financing from these bonds include contribution to the environment to mitigate climate change effects, conservation of natural resources and biodiversity, and prevention and control of pollution.
Projects that promise energy efficiency, including green buildings, energy storage, and smart grids, would also be eligible to get funding through the new breed of bonds that Nabard is rolling out.
- Also Read: NABARD-businessline Millets Conclave 2023. Millets production set to triple by 2030: Nabard Chairman
In the social sphere, ventures that fall into the categories of affordable basic infrastructure ; access to essential services (health, education, and vocational training); food security, and employment generation.
Stating that the Government is trying to strengthen the cooperative sector, he said the bank would finance State cooperative bodies so that they could ensure fund flow to the district and primary cooperatives. “There is a ₹5,000 Agri Infrastructure Fund. We will offer funds to them at 4 per cent. Of this, they can claim an interest subsidy of 3 per cent. Effectively, they will get funds at 1 per cent. We are mindful that these are Rs 1-2 crore projects and that we should not overburden the societies with debt,” he said.
He said agriculture credit is not a limiting factor in supporting projects on the ground.