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Cabinet approves augmentation of capital base of NABARD

The Union Cabinet yesterday approved a proposal for augmenting the capital base of National Bank for Agriculture and Rural Development (NABARD) by infusing Rs.3,000 crore as Government equity in two installments of Rs.1,000 crore in 2011-12 and Rs.2,000 crore during 2012-13.

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This would raise the paid-up capital of the institution to Rs.5,000 crore, an official press release said here.

Presently, the authorised capital of NABARD is Rs.5,000 crore, of which, the paid up capital is Rs.2,000 crore. The Government of India holds 99% share capital of NABARD.

As per the guidelines of the Reserve Bank of India (RBI), the outstanding total resources mobilised at any point of time by a financial institution should not exceed 10 times its net owned funds (NOF).

Therefore, it had become important to raise NABARD's NOF such that its ability to mobilise resources from the market could be enhanced.

"The infusion of the additional share capital by the Government of India will increase the net owned funds and thus the borrowing capacity of NABARD to enable it to extend its various activities," the release added.

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