The union cabinet today approved the proposal for augmenting the capital base of the National Bank for Agriculture and Rural Development (NABARD) by infusing Rs3,000 crore as government equity.
This will be done in two instlaments of Rs1,000 crore in 2011-12 and Rs2,000 crore during 2012-13. This will raise the paid-up capital of the rural sector lender to Rs5,000 crore.
The additional capital base will help Nabard mobilise higher resources from the market.
As per RBI's guidelines, the outstanding total resources mobilised at any point of time by a financial institution should not exceed 10 times its net owned funds (NOF).
Hence, it is essential that net owned funds of Nabard increases so as to be able to mobilise more resources from the market.
Nabard has an authorised capital of Rs5,000 crore, of which, the paid-up capital is Rs2,000 crore.
The government of India holds 99 per cent share in Nabard after the Reserve Bank of India (RBI) divested its 71.5 per cent stake in Nabard to the government last year.