The Hindu Business Line : Capital gains bonds — Nabard hopeful of Rs 1,500-cr mop-up

THE National Bank for Agriculture and Rural Development (Nabard) expects to mop up around Rs 1,500 crore from its capital gains bonds issue during the current fiscal.

"We have already mobilised Rs 800 crore, which is likely to cross Rs 1,500 crore by end-March'', the Nabard Chairman, Mr Y.C. Nanda, told presspersons here on Wednesday.

Nabard had mobilised Rs 3,248 crore from its earlier capital gains bond issues between September 2000 and March 2002. The bonds currently fetch an annual interest rate of seven per cent.

Although the interest earned is taxable, investments in capital gains bonds are eligible for capital gains tax savings under Section 54EC of the Income Tax Act, 1961. Gains made out of sale of capital assets need to be invested in these bonds within six months of the transaction for the proceeds to be exempt from capital gains tax. Further, the investments attract a minimum lock-in period of three years.

Mr Nanda said that Nabard's total working funds as on March 31, 2002 amounted to Rs 45,099 crore, with net-owned funds being Rs 20,266 crore. "We have been taking steps to augment our resources, of late, through market borrowings. Even here, we have been keeping costs low by marketing our capital gains bonds to the public without involving intermediaries or brokers'', he added.

According to Mr Nanda, Nabard was yet to take any decision on bringing down its refinance rates, following the recent 25 basis points cut in the bank rate announced by the RBI. "We are reviewing the refinance rate structure'', he said. Currently, Nabard's refinance rates range from 7-10 per cent for investment credit, 5.5-7 per cent for short-term credit and 8.5 per cent for loans made to State Governments from the Rural Infrastructure Development Fund.

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