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Informist, Monday, Jul. 7, 2025
By Priyasmita Dutta and Sagar Sen
NEW DELHI – Owing to robust rural sector demand, overall credit to the agriculture sector by commercial banks and regional rural banks is likely to be 10% higher in 2025-26 (Apr-Mar) at a record INR 32 trillion, National Bank for Agriculture and Rural Development Chairman Shaji K.V. said Monday. "We surpassed FY25 target of INR 28 trillion and did about INR 29 trillion, this year will be even better," he told Informist.
"Only last week we finalised the target," he said on the sidelines of Confederation of Indian Industry's Financial Inclusion and Fintech Summit here.
In order to boost credit to the rural sector with the help of effective and hassle-free agriculture credit, the government has been fixing annual targets for ground level agriculture credit, with NABARD playing a key role in promoting rural and agriculture credit. It is also a nodal agency for credit planning for priority sectors and for disbursements under various government schemes.
According to government data, over the past decade, agricultural credit disbursement witnessed an average annual growth rate of more than 13%, reflecting the increasing financial support extended to the sector. In the financial year FY24, agricultural credit disbursement reached INR 25.50 trillion.
State Bank of India's total advances in FY25 were INR 42.21 trillion, up 12%. Of this, its agriculture credit grew 14% to INR 3.49 trillion. In the current financial year, SBI Chairman C.S. Setty said credit will likely grow 12-13% from the previous year. If agriculture credit grows in tandem, it will likely total INR 4 trillion.
In order to fuel the huge rural credit demand, Shaji K.V. said that NABARD is planning to launch the second leg of funds by NabVentures, called NabVentures Fund II, in Jul-Sept itself with a corpus of INR 10 billion. "Very soon...in this quarter only the fund will be announced," the chairman said. NabVentures, a subsidiary of NABARD, had in 2019 launched NabVentures Fund--a venture capital fund with a corpus of INR 5.98 billion.
The NabVentures Fund I focussed on investments in agriculture, food, rural businesses, and agri or rural financial services at early to mid-stage. The second leg of the fund will also focus on climate-smart agriculture and climate resilience, Shaji K.V. said.
To fund its lending plans, NABARD taps the corporate bond market as and when required. It recently received the Central Board of Direct Taxes' green signal to raise INR 195 billion through zero-coupon bonds on or before Mar. 31, 2027. According to the chairman, the market is presently "not ripe" to raise funds through this instrument. "Considering we have time till March 2027, we will time the fund raising appropriately," he said.
Public sector companies can raise funds through zero coupon bonds only after getting permission from the finance ministry as the Central Board of Direct Taxes has to provide a special tax provision to allow the return on these papers to be classified as capital gains rather than interest income. Capital gains are taxed at a lower rate than corporate tax. Non-interest-bearing bonds, or zero-coupon bonds as they are popularly known, sell at a discount and do not offer any periodic interest payment.
The NABARD chairman also said that in Jul-Sept, the development bank will finalise how they will pace their borrowing but will likely lean more towards infrastructure bonds than zero-coupon bonds given the market conditions. "Either way our bonds are rated 'AAA' so market will absorb them," he said. "This quarter we will understand the demand and the structure of assets that we will be lending and the fund raise will depend on that," he added.
In FY25, NABARD's net profit rose 25% to INR 76.28 billion. End
Edited by Ashish Shirke
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