CARE assigns 'AAA' rating to NABARD’s borrowing

MUMBAI: CARE has assigned CARE 'AAA' rating to National Bank for Agriculture and Rural Development’s umbrella borrowing of Rs 7,000 crore, for maturities between 1-10 years.

Instruments with this rating are considered to be of the best credit quality, offering highest safety for timely servicing of debt obligations. Such instruments carry minimal credit risk.

The rating reflects NABARD's strong parentage arising from ownership by Reserve Bank of India (72.5%) and the government (27.5%) and its role as the apex refinancing, supervisory and developmental institution for the agriculture and rural sector.

NABARD's negligible non-performing assets level, high capital adequacy, satisfactory interest coverage and comfortable asset-liability management profile are a source of strength. NABARD's strong asset protection mechanism offsets the weak credit quality of some of its borrowers.

NABARD's outstanding advances stood at Rs 69,507.90 crore as on March 31, 2007 compared to Rs 58,087.94 crore the previous year. During 2006-07, NABARD increased rate of interest on refinance leading to increase in yield on advances. However, increased dependence on market borrowing at higher cost has offset the impact of increase in yield on NABARD's spreads.

NABARD reported profit after tax of Rs 856 crore in FY07 same as that of last year mainly due to payment related to wage settlement of Rs 108 crore pertaining to earlier years. Overall gearing has risen but is comfortable at 1.97 times as on March 31, 2007. Interest coverage has been satisfactory at 1.45 times for FY07. NABARD had strong capitalization level as on March 31, 2007 with CRAR at 26.97 per cent.