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 ₹ 3,000 crore. This is a first-of-its-kind borrowing instrument.
NABARD Chairman Shaji KV has said, “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.”
Though the market is very eager to hear reports that the bank will come out with such new borrowing instruments to finance projects in the green, sustainability, and social sectors, this is the first time that it has indicated a specific timeline for rolling out the bonds.
The NABARD chief was in Hyderabad to take part in the national conference on millets, hosted by businessline and NABARD last week.
He said that the NABARD might go for borrowings to the tune of ₹3-4 lakh crore in the current financial year. Further, he added that “It will be spaced out and governed by SEBI regulations.”
Framework for Sustainability Bond
NABARD has recently announced a Sustainability Bond Framework, through which it 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 contributions to the environment to mitigate climate change effects, prevention and control of pollution, and conservation of natural resources and biodiversity.
Energy efficiency promising projects, such as 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.
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.
Since the Government is trying to strengthen the cooperative sector, the bank would finance State cooperative bodies so that they could ensure fund flow to the district and primary cooperatives, he added.
“There is a ₹5,000 Agri Infrastructure Fund. We will offer funds to them at 4 %. Of this, they can claim an interest subsidy of 3%. Ultimately, they will get funds at 1%. We are mindful that these are ₹ 1-2 crore projects and that we should not overburden the societies with debt,” he said.