Nabard Plans to Undertake Its Maiden External Commercial Borrowing in FY26 for Climate Financing

The National Bank for Agriculture and Rural Development (Nabard) is preparing to initiate its first external commercial borrowing in the financial year 2025-26. This move follows approval from the Reserve Bank, as confirmed by Nabard's chairman, Shaji KV. "We have the permission in place and have started work on it," Shaji stated during the annual Fibac event.

Shaji mentioned that while Nabard is eager to proceed with the issuance in FY26, specific details about the timeline or the amount to be raised remain undisclosed. The funds obtained from this issuance will be allocated towards financing activities related to climate change. These funds are available at a discounted rate, and almost all of Nabard's rural portfolio qualifies under this category.

External Commercial Borrowing Plans

Nabard has not yet appointed merchant bankers for this fundraising effort. The final borrowing costs will significantly influence the outcome of their external commercial borrowing (ECB) plans. Initially, Nabard will establish a representative office in GIFT City to facilitate the ECB process. If activities increase, there is potential for opening a full-fledged branch at this international financial services centre.

When questioned about the lack of domestic market issuances despite having a borrowing calendar, Shaji attributed it to rising yields. He suggested that higher costs have prevented Nabard from accessing domestic markets effectively.

As Nabard progresses with its ECB plans, it remains focused on ensuring that the proceeds are used efficiently for climate-related projects. This strategic move aligns with its broader goal of supporting sustainable development in rural areas through discounted financing options.

With inputs from PTI