BS Analysis

AN ANALYSIS OF NABARD’S FINANCIAL STATEMENTS An analysis of the financial position of NABARD as revealed in the financial statements 600000 30.00 400000 20.00 200000 10.00 0.00 0 14% 32% 15% 36% 43% 12% 18% 22%20% 27% 29% 32% KVSSLV Prasada Rao, DGM, NABARD, IDD, HO, Mumbai

Analysis of NABARD’s financial statements1 The size of the Balance Sheet of NABARD has grown manifold over the years from ₹.4519 crore at the end of first year of its operations to ₹.487470 crore as on 31 March 2019 registering a compounded annual growth rate (CAGR) of 13%. A brief analysis of the financial position of NABARD during the last few years as revealed in the financial statements is given in this note. Growth in Balance sheet 2. The total resources of the Bank increased from ₹.4519 crore as at the end of the first year of its operations to ₹487470 crore as at the end of 31 March 2019. The resources of the bank during the period 2000 to 2019 are depicted in Chart I, while the growth on Y-o-Y basis and CAGR during the last 20 years are given in Chart 2. Chart 1 - Balance sheet ( ₹ in crore) 33367 38816 45098 50885 55889 60779 67605 81220 98706 118176 136292 158872 182075 213170 254574 286048 310385 348260 406642 487470 Chart 2 - Growth in Balance Sheet (%) Y-o-Y Growth CAGR 15 16 16 13 10 9 11 20 22 20 15 17 15 17 19 12 9 12 17 20 Balance Impressive quantum jump in absolute terms since inception Sheet CGAR of 13% since inception Y-o-Y Growth not uniform Change in Mix of liability products - ST/LT borrowings, LTIF borrowings, Mandated borrowings Change in mix of loan products- NIDA, LTIF, PMAY, etc. 1Prepared by KVSSLV Prasada Rao, DGM, IDD, Head Office, Mumbai, based on the information from Annual Reports of NABARD only. Data/Summaries/Ratios have been qualified wherever possible. Readers are requested to refer to the Annual Reports and other formal sources for correct data/information. 2

Sources & Uses of Funds 3. NABARD’s sources of funds & their uses during the last two years are given in Table No.1: Table No.1 – Sources and Uses of Funds (₹ crore) 31-03-19 31-03-18 Share 19 Share 18 Growth (%) Sources of Funds 12580 31094 Capital 16086 10580 2.58 2.60 18.90 126064 27731 6.38 6.82 12.13 Own Funds Reserves & Surplus 55000 16082 3.30 3.95 0.02 43000 121285 25.86 29.83 3.94 NRC Funds 60947 55000 11.28 13.53 0.00 49829 38001 8.82 9.35 13.15 Mandated RIDF,WIF,FP Deposits 72950 27777 12.50 6.83 119.42 Borrowings STCRC/RRB Deposits 19920 43738 10.22 10.76 13.93 LTRCF 487470 47056 14.97 11.57 55.03 19392 4.09 4.77 2.72 Market LTIF & PMAY 37872 406642 100.00 100.00 19.88 Borrowings ST Borrowings 125423 LT Borrowing, inc. Forex 28393 7.77 6.98 33.38 62784 114597 25.73 28.18 9.45 Other Liab. Others 4090 12.88 15.60 -1.02 34249 63429 0.84 0.82 22.75 Total 18008 3332 7.03 5.03 67.50 8698 3.69 1.80 145.71 Uses of Funds 20447 1.78 0.00 432 7329 0.09 0.00 - Investments Investments 344 0.07 0.00 - 152408 122688 31.27 30.17 - RIDF, WIF, FP 4450 2950 0.91 0.73 24.22 9126 7241 1.87 1.78 50.85 SAO 139 220 0.03 0.05 26.03 11375 2.33 2.94 -36.82 Directed/ ST(Others) 11954 0.01 0.01 -4.84 Mandated LTIF 70 42 3.61 5.79 66.67 Loans PMAY 17588 100.00 100.00 -25.30 SBM - G 487470 23545 19.88 406642 DIDF Loans under GCF LT Refinance2 LT Refinance Direct Ref. to DCCBs Direct Finance Loans under NIDA (New Loans to FPOs Products) CFF LT Non-project Loans Others Fixed Assets & Others Total Growth in Assets increased by 20% 2018-19 Growth in Capital (19%) and Reserves (12%) Mix of liability products - ST/LT borrowings, LTIF borrowings, Mandated borrowings Increasing share of new business producs - NIDA, LTIF, PMAY, etc. Earning Assets increased by 23%; Earning assets form 96% of total assets Cost free resources increased by 37% during 2019 and formed 27% of Resources 2 Includes Refinance under LTRCF 3

4. The sources of funds include Capital & Reserves, NRC Funds, Deposits and Borrowings. An overview of different sources3 of Funds is depicted in Box 1. Box No.1 – Sources of Funds Cost-free resources 2018 2019 Growth (₹ crore) STRCRF Capital STRRBF Reserve & Other funds 10580 12580 152% Short Term NRC funds 27731 31094 12% CoD LTIF/PMAY-G/SBM-G 16082 16086 0 Long Term CPs Gifts, etc. & Other Funds 12622 37182 CBLO Other Liab & Provisions 104% TMB 1948 1649 -15% RIDF Dep 12345 12889 WIF 81308 111780 4% FPF 37% LTRCF PMAY-G Capital SBM-G Term Loan Cost-free Reserves TFB/NPS/CGB/ Cost-bearing BNB Funds created out of profit Grants Donations Cost bearing resources 2018 2019 Growth (%) RIDF, WIF, FP Deposits 121285 126064 4 STCRC/RRB Deposits 0 LTRCF 55000 55000 LTIF & PMAY 38001 43000 13 Short Term Borrowings 15155 23464 55 LT Borrowing, incl Forex 43738 49830 14 Others 47056 72950 55 Total Cost-bearing Total Resources 5099 5383 6 325334 375690 15 406642 487470 20 3 Under Cost-free sources,  Gifts & Other funds include those funds where NABARD is not required to credit interest on unutilised balances  LTIF/PMAY-G/SBM-G Bonds which are fully serviced by GoI 4

5. The trend analysis in respect of some of the important components of the balance sheet is given in the following paragraphs. Share Capital, Reserves & Surplus 6. The authorized capital of NABARD increased from ₹.100 crore at the time of establishment of NABARD to ₹.30000 crore as on 31 March 2019. The NABARD(Amendment) Act, 2018 raised the authorize capital of NABARD to ₹ 30000 crore. The paid-up capital also increased from ₹.100 crore to ₹.12580 crore during the same period. Changes in the capital structure are given in Table No.2. The reserves and surplus increased from ₹.27731 crore as on 31 March 2018 to ₹ 31094 crore as on 31 March 2019. Table No. 2 How does increase in capital help? Changes in the Capital structure (₹ crore)  Strong capital base enabling easy access to market borrowings ` 1982 2019  Increase in CRAR Authorised Capital 100 30000  Availability of cost-free resources Paid up Capital 100 12580 which enables cross-subsidisation  Increase in credit exposure limit to Shareholders GoI & RBI GoI (50:50) individual banks/institutions NRC Funds 7. The balance in NRC(LTO) Fund increased from ₹.5687 crore as on 31 March 1991 to ₹.14493 crore crore as on 31 March 2019, and NRC(Stabilisation) Fund from ₹.773 crore to ₹ 1593 crore. The position during the last 5 years is given in Table No. 3 Table No.3 – NRC Funds Outstanding (₹ crore) 31-Mar-15 31-Mar-16 31-Mar-17 31-Mar-18 310Mar-19 14493 NRC (LTO) Fund 14485 14487 14489 14491 1593 NRC(Stab.) Fund 1585 1587 1589 1591 Sources & Uses of LTO Funds Fund Use Sources  RBI ceased to contribute in a bigger way – NRC (LTO) Fund Contribution limited to ₹ 1 crore each to MT & LT Contributions  the funds; NRC(Stab.) Fund Refinance by RBI &  NABARD is also contributing ₹ 1 crore Refinance for NABARD each only; conversion of These funds are not considered for ST Loans computation of CRAR Short-Term Co-operative Rural Credit (Refinance) Fund (STCRCF) 8. The balance in Short-Term Co-operative Rural Credit (Refinance) Fund (STCRCF) increased from ₹.4622 crore as on 31 March 2009 to ₹.45000 crore crore as on 31 March 2019. The position during the last 5 years is given in Table No.4 5

Table No. 4 Outstanding under STCRCF as on (₹ crore) 31-Mar-15 31-Mar-16 31-Mar-17 31-Mar-18 31-Mar-19 45000 STCRC Fund 60000 53991 45009 45000 Sources & Uses Fund Use Sources  Set up during 2008-09 STCRC Fund ST (SAO) Contributions  Initial corpus of ₹ 5000 crore Refinance to by  Augmented every year Coop. Banks Commercial  To augment NABARD’s resources for Banks short-term credit facilities to Co-operative Institutions  contributions by scheduled commercial banks not achieving their priority sector obligations Short Term Rural Credit (Refinance) Fund for RRBs 9. The balance in Short-Term Co-operative Rural Credit (Refinance) Fund was ₹ 10000 crore as on 31 March 2018. The position during the last 5 years is given in Table No. Table No.5 Outstanding under STRC(R) Fund as on (₹ crore) 31-Mar-15 31-Mar-16 31-Mar-17 31-Mar-18 31-Mar-19 10000 STCRC Fund 30000 15997 10003 10000 Sources & Uses Fund Use Sources  Set up during 2012-13 STCRC(R) ST (SAO) Contributions  Initial corpus of ₹ 10000 crore Fund of RRBs Refinance to RRBs by  Augmented every year Commercial  To augment NABARD’s resources for Banks short-term credit facilities to RRBs  contributions by scheduled commercial banks not achieving their priority sector obligations Long Term Rural Credit Fund (LTRCF) 10. The balance in Short-Term Co-operative Rural Credit (Refinance) Fund was ₹ 10000 crore as on 31 March 2019. The position during the last 5 years is given in Table No.6 Table No.6 Outstanding under LTRCF as on (₹ crore) 31-Mar-15 31-Mar-16 31-Mar-17 31-Mar-18 31-Mar-19 LTRCF 5000 18997 30000 38001 43000 Fund Use Sources & Uses Long Term Concessional LT Rural Refinance to Sources  Set up during 2014-15 Contributions  Initial corpus of ₹ 5000 crore by  Augmented every year 6

Credit Cooperative Commercial  To augment NABARD’s resources for Long-term Fund refinance to Co-operative Institutions and RRBs (LTRCF) Banks and RRBs Banks  Contributions by scheduled commercial banks not achieving their priority sector obligations RIDF Deposits 11. RIDF deposits mobilized from commercial banks which are not fulfilling the priority sector target under Agriculture started from the year 1996 with a modest amount of ₹.350 crore and increased to ₹.119763 crore as on 31 March 2019. The RIDF deposits outstanding and the share of RIDF deposits in total resources are given in Table No.7. (₹.crore) Table No. 7 RIDF Deposits outstanding as on 31 March and raised during the year (₹ crore) 2015 2016 2017 2018 2019 RIDF deposits outstanding (`.crore) 89603 96885 105502 116314 119763 Share of RIDF deposits in resources (%) 31.32 31.21 30.3 28.6 24.57 RIDF deposits raised during the year 19000 22987 25650 25999 26654 RIDF Mobilised from CBs having shortfall in achieving priority sector lending targets Deposits RIDF 1 - Shortfall in lending Priority Sector - Agriculture RIDF II - XIV - Shortfall in Priority Sector lending and/or Agriculture RIDF XV onwards - shortfall from priority sector and/or agriculture and/or weaker section (10%) Contributed to the manifold increase in size of Balance Sheet; But share declining Account for 25% (29% last year) of the total resources as on 31 March 2018 Borrowings 12. There has been considerable increase under the head over a period mainly due to increase in market borrowings by NABARD. The borrowings4 of NABARD as a percentage to working funds have gone up from 15% as on 31 March 2015 to 38% as on 31 March 2019 as given in Table No.8. Table No.8 – Borrowings outstanding & share in total resources as on 31 March (₹ crore) Year 2015 2016 2017 2018 2019 Borrowings 43785 59973 85684 118738 183811 outstanding % Share 15.32 19.32 24.60 29.2% 37.71% 4Includes deposits (excluding RIDF, WIF, FPF & STCRCF deposits), borrowings, bonds and foreign currency borrowings 7

13. Augmentation of resources during the last five years (excluding the deposits received towards RIDF, STCRC Fund, STRCF for RRBs, and LT RC Fund) is given in Table no.9: Table No.9– Augmentation of resources (₹.crore) during S.No. Source 2014-15 2015-16 2016-17 2017-18 2018-19 22899 1 Corporate Bonds 9850 13230 11840 16600 14037 2 Certificate of Deposits - 6000 7479 4001 167448 9774 3 Commercial Paper 37450 53470 48238 121152 - 13802 4 Term Money Borrowing 945 3349 4910 7728 10669 8698 5 Tax Free Bonds - 5000 -- 27000 344 6 LTIF @ - - 9086 11361 7 PMAY-G Bonds$ - - - 7330 8 Swatch Bharat Mission – G $ - - -- 9 Term Loans from CBs - - -- 10 Foreign Currency Borrowing - - - 160 @ include GoI-serviced and NABARD’s share $ Fully serviced by GoI Borrowings Option to issue CGBs, TFBs and PSBs withdrawn w.e.f. 01 April 2006 Presently, resource mobilisation through Corporate Bonds, CPs, CODs Introduction of new liability products like LTIF Bonds, PMAY-G, SBM-G issued by NABARD; Part of LTIF bonds and the entire amount raised under PMAY-G and SBM-G serviced fully by GoI Borrowings through Term Loans from CBs during 2018-19 Uses of Funds Short-Term Refinance – Production and Marketing Credit 14. The production and marketing credit (extended to SCBs and RRBs) outstanding recorded a quantum jump from the level of ₹.2956 crore as at the end of 31 March 1991. It stood at ₹.66737 crore as at the end of 31 March 2019. The production and marketing credit outstanding is given in Table No.10 Table No.10 – Production and Marketing Credit outstanding as at the end of 31 March (₹ crore) & Growth (%) over previous year and share in total assets 2015 2016 2017 2018 2019 Amount 88711 69719 73553 66128 66737 Growth(%) 11.2 -21.4 5.5 -10.0 0.92 Share in Assets 31.04 22.46 21.12 16.26 13.69 8

ST Refinance for lending under ST-SAO, ST (Others) Refinance Mandated lending through mandated borrowing Special funds viz., STCRCF, STRRBF for the purpose GoI's policy of Providing Crop loans to farmers @ 7% interest Subvention from GoI to NABNARD for raising resources, to the extent of difference between the cost of borrowing by NABARD and the refinance rate Administrative charges to NABARD by GoI on providing refinance under interest subvention scheme to StCBs, RRBs Declining share in the total assets Investment Credit 15. Refinance assistance extended to banks for medium and long term investment credit reached a level of ₹ 152409 as on 31 March 2019 as against ₹.122688 crore, as on 31 March 2018. The investment credit refinance outstanding is given in Table No. 11. Table No.11 – Investment Credit outstanding as at the end of 31 March (₹ crore) & Growth (%) over previous year and share in total assets 2015 2016 2017 2018 2019 Amount 68386 89424 105208 122688 152409 Growth(%) 24.5 30.8 17.7 16.6 24.22 Share in Assets 23.93 28.81 30.21 30.17 31.27 Disbursements 31427 48064 53506 65240 90254 during the year LT Sources - NRC(LTO) Fund, LTRCF, Market Borrowings Refinance Differentiated rates of interest - Refinance through LTRCF and other sources Quantum jump in disbursements during the last 5 years Considerable increase in share of refinance in total assets in the last 5 years Share of LT Refinance in total assets as on 31 March 2019 - 31% - Major contributor to the growth in Balance Sheet Project Loans under RIDF 16 The RIDF loans outstanding, the share in the total assets and RIDF loans disbursed, etc. are given in Table No.12. 9

Table No.12 – RIDF Loans outstanding as at the end of 31 March (₹ crore) & Growth (%) over previous year and share in total assets 2015 2016 2017 2018 2019 RIDF loans outstanding 83545 91384 100981 110062 120163 Growth(%) 6.7 10.7 11.3 9.6 9.43 Share in Assets 29.63 30.20 29.00 27 24.65 RIDF loans disbursed 19666 23510 25600 24993 27623 RIDF loans Source - RIDF deposits from Commercial Banks Mandated borrowing and lending at administered rates of interest Contributed to the growth of balance sheet over the years; But share in total assets on decline Share of RIDF loans in total assets declined to 25% during 2018-19 Other Loans 17. The business under the diversified activities taken as a part of repositioning of NABARD is growing every year and started contributing to NABARD’s income. Further, the following new activities have been added in the recent past: S.No. Fund Borrowers 1 Long Term Irrigation Fund LTIF was instituted in NABARD to expand irrigation (LTIF) infrastructure as a part of PMKSY 2 Pradhan Mantri Awaas Yojana NABARD is raising resources from market for on lending Gramin (PMAY-G) to the National Rural Infrastructure Development Agency (NRIDA), the nodal agency to meet the GoI’s shortfall in the PMAY-G 3 Swatchh Bharat Mission- NABARD is raising resources from market for on lending Gramin (SBM-G) to National Centre for Drinking Water, Sanitation and Quality (NCDWS&Q), the nodal agency 4 Dairy Processing and The fund was created in NABARD to modernize the milk Infrastructure FUND (DIDF) processing plants and machinery and to create additional milk processing infrastructure for greater value addition, especially in the Cooperative Sector. During the year, loans were extended to NDDB for on- lending to Cooperative Milk Unions and Federations; 5 Green Climate Fund – Line of NABARD extended term loan facility to Tata Cleantech Credit for Solar Rooftops Capital Ltd. For on-lending to downstream borrowers under the GCF. The loans outstanding under these categories are given in Table No.13: 10

Table No.13– Other loans outstanding as on 31 March (₹.crore) 2015 2016 2017 2018 2019 34249 Loans under LTIF 9086 20447 18008 Loans under PMAY-G - - - 7329 8698 432 Loans under SBM-G --- - 344 Loans under DIDF --- - 9126 4450 Loans under GCF --- - 11375 NIDA 2223 3239 4978 7241 139 DF to Coops. 2818 3251 2565 2950 Credit Facility to Federations 4827 4949 6961 11954 Loans to FPOs - 378 335 234 Diversifi- Diversification in loan portfolio after Repositioning exercise cation of loan New products included NIDA, Direct refinance to cooperative banks, portfolio Credit facility to Federations, loans under PODF,etc. Considerable increase in loans under NIDA Increase in ST lending purposes like Direct Finance to Coops/CFF, etc. Loans under LTIF, PAY-G, SBM-G, DIDF new additions to the loan portfolio, whichc will yield fixed income over a long period Considerable income from the new activities Investments 18. The investments outstanding as on 31 March 2018 and 2019 are given in Table No.14: Table No. 14 Investments as on 31 March (₹ crore) 2018 2019 G-Secs 15589 16165 Subsidiaries (₹ crore) Equity Shares 1137 1131 2018 2019 102 Debentures & Bonds 2427 3146 NABFINS 102 60 85 Shareholding in 180 257 NABSAMRUDHI 26 5 5 Subsidiaries & JVs NABKISAN 47 Other Investments 9060 17173 NABCONS 5 28393 37872 NABVENTURES - Other Investments (₹ crore) 2018 2019 MFs - 7587 CPs 3424 553 CoD 5206 8615 VC/AIFs 181 192 Others 250 226 11

Investments Increase of 34% over previous year Deployment of surplus in G-Secs and other financial instruments Strategic investments in SIDBI/AICI/NCEDEX/AFC/MCX the operations of which have an impact on agriculture and rural development Diversification of investment portfolio by investing in public issues of few companies and short term investments in MFs, CPs, CoDs, etc. Increase in investments of subsidiaries (NABKISAN and NABSAMRUDDHI) Investments in venture capital funds to facilitate venture investments in agriculture and rural development sectors Treasury management Business portfolio of NABARD - A snapshot 19. The total financial support by NABARD during 2017-18 was ₹ 223355 crore during 2017-18 as against ₹ 197513 during 2016-17. The financial support5 extended by NABARD during the last 5 years is given in Chart No.3. CHART NO.3 - BUSINESS (₹ CRORE) 281607 ST Ref LT Ref Infrastructure New Business Products 38873 62390 152640 157949 197513 223355 23054 33369 90255 10865 13940 35979 45042 20405 24871 90089 31427 48064 53506 65240 90151 71217 84974 79704 2014-15 2015-16 2016-17 2017-18 2018-19 20. The major components of financial support consisted of refinance to Rural Financial Institutions for extending short term credit and long-term investment credit, direct lending to cooperatives, support to State Governments under RIDF, support to State owned institutions/corporations under NIDA and support for various development initiatives including natural resources management, micro finance, non-farm sector, technology, etc. A comparison of business during the last three years is depicted in Chart 4 : 5 NIDA included under New Business Products 12

CHART NO.4 - SHARE OF BUSINESS PRODUCTS DURING LAST 3 YEARS ST Ref LT Ref Infrastructure New Business Products 14% 32% (₹ crore) 2016-17 2017-18 2018-19 15% 36% ST Ref 84974 79704 90089 43% LT Ref 53506 65240 90255 12% Infrastructure 35979 45042 62390 New 18% Business 23054 33369 38873 22% Products 197513 223355 281607 Total 20%  Increase in share of LT Refinance 27%  Decrease in share of ST Refinance 29%  Increase in share of Infrastructure 32% financing 2016-17  Steady growth in new business products 2017-18 2018-19 Income & Expenditure 21. The profit before tax has increased from ₹.483 crore during the year 1990-91 to ₹4354 crore during 2018-19. Profit after tax stood at ₹ 2962 crore and ₹.3365 crore during the year 2016-17 and 2017-18 respectively. The break-up of income, expenditure and profit for the years 2013-14 to 2017- 18 are given in Table No.15. Table No. 15 Income & Expenditure (Amount in ₹ crore) Income & Expenditure during Growth (%) over previous year 14-15 15-16 16-17 17-18 18-19 14-15 15-16 16-17 17-18 18-19 Income 15267 17712 19069 21226 26142 17 16 8 11 23 Interest recd. 2218 2812 3021 2983 3354 3 27 7 -1 12 Income from 319 206 188 182 172 67 -35 -9 -3 -5 Inv. 17804 20730 22277 24391 29668 15 16 7 9 22 Other Receipts 12929 15439 16268 17847 22199 14 19 5 10 24 Total 16 Expenditure 1230 1461 1953 1934 1892 2 33 -1 -1 Interest Exp. 61 46 44 53 61 -26 -4 20 16 Est. & Other 114 106 168 186 522 56 -7 Prom. activities 49 26 27 17 34 98 -47 59 11 181 14 19 5 -38 100 Provisions 14383 17077 18460 20037 24709 23 7 8 9 23 Depreciation 3421 3653 3817 4354 4959 4 14 14 Total 1018 1129 1171 1392 1595 6 11 4 19 14 PBT[1] 2403 2524 2646 2962 3365 29 5 5 12 14 Prov.for IT PAT 13

Income & Growth in income - 22% during 2018-19 against 9% 2017-18 Expenditure Growth in expenditure - 23% during 2018-19 against 9% during 2017-18 Increase of 67% in income and 40% in profit during the last 5 years Increase in interest income by 12% during 18-19 as against 11% 17-18 Increase in interest expenditure by 24% against 10% during 17-18 Reduction in establishment expenditure during 2018-19 89% of expenditure was towards Interest charges & 5% towards Salaries & Allowances What contributed to Profit during 2018-19? 22. The factors that contributed to profit of ₹ 3365 crore during 2018-19 are depicted in Box No.2. As may be seen therefrom, the factors included the resource mix and allocation and the increase in interest income that outweighed the increase in interest expenditure. Box No.2 - What contributed to Profit during 2018-19? Resource mix & Allocation Factors of +ve impact on profit Income & Expenditure (₹ crore) 31-03-18 31-03-19 Growth(%) Share Assets 383096 469882 23% 96% Increase in interest Increase in Interest Factors of -ve impact on Profit Earning 23546 17588 -25% 4% income (22%) Exp. (24%) Non-Earning Resources 75728 111780 48% 23% Increase in Increase in Provisions Cost Free 330914 375690 14% 77% Investment Income (180%) (12%) Cost bearing Reduction in Staff • 96% earning assets & only 77% resources carry cost cost (-1%) • Increase in cost-free resources • Increase in business levels; Profit of ₹ 3365 crore • Increase in share of earning assets • Decrease in Non-earning assets • Increase in high-yielding business products viz., LT Refinance, New Business Products, etc. • Increase in fixed income yielding business Income Segmentation 23. Segmentation of income for the years 2014-15 to 2018-19 is given in Table No. 16. 14

Table No.16 - Income segmentation (₹ crore) Segment 2014-15 2015-16 2016-17 2017-18 2018-19 Revenue Profit Direct Finance Revenue Profit Revenue Profit Revenue Profit Revenue Profit Refinance 11586 2483 Treasury 6186 610 7017 911 7906 1371 9118 2313 14678 2807 Other Business Total 9253 1898 10875 2606 11317 3086 12241 3514 3356 1598 49 -1929 2219 2081 2814 1619 3027 1391 2988 530 29669 4959 147 -1168 26 -1483 29 -1505 44 -1510 17806 3421 20732 3653 22279 4343 24391 4847 24. The share of different segments in the total income and profit is given in Table No.17. Table No.17 - Income segmentation - Share of segments (%) Segment 2014-15 2015-16 2016-17 2017-18 2018-19 Revenue Profit Direct Revenue Profit Revenue Profit Revenue Profit Revenue Profit Finance 39 50 Refinance 35 18 34 25 35 32 37 48 Treasury 49 57 Others 52 55 52 71 51 71 50 72 11 32 12 61 14 44 14 32 12 11 0 -39 1 -34 0 -41 0 -35 0 -31 25. The above reveals the following: Income Refinance continues to be the major source of revenue - 49% during 2018-19 seg- Considerable jump in the share of profit from Direct Finance during the last 5 years mentation Increase in the revenue/profit from Treasury during 2018-19 Costs & Margins 26. The costs and margins as percentage to average working funds6 are given in the Table No.18. Table 18 – Costs & Margins during 2014-15 2015-16 2016-17 2017-18 2018-19 5.62 5.85 Financial Return (FR) 5.7 5.94 5.79 4.73 4.97 Financial Cost (FC) 0.90 0.88 Financial Margin (FM = FR-FC) 4.8 5.18 4.94 0.52 0.43 Cost of Management (CoM) 0.84 0.79 Miscellaneous Income(MI) 0.9 0.76 0.85 0.05 0.12 Risk Cost 1.17 1.12 Net Margin 17 0.47 0.50 0.60 0.78 0.75 Net Margin 2 0.53 0.54 Net Margin notional cost (6%) on 0.94 1.01 0.97 NRC Funds 0.04 0.04 0.05 1.29 1.24 1.17 0.89 0.85 0.80 0.53 0.52 0.51 6 Average of working funds at the beginning and end of the year taken. May not match with the ratios given in our Annual Report 7 NM1 – Net Margin before tax; NM2 – Net Margin after Tax 15

27. On an analysis of costs and margins, the following are observed: Costs & NABARD’s net margin - profit as %age to average working funds has slightly Margins declined to 0.75% during 2018-19 form 0.78% during 2017-18 Reduction in CoM from 0.52% to 0.43% & Increase in Risk Cost to 0.12% CoM as %age of AWF declined during the last two years - A pointer to increased staff productivity; Employee Productivity 28. The per employee business and Net profit per employee during the last five years are given in Table No.19. Table No.19 – Per employee business and Net profit per employee (₹ crore) Per employee business8 as on 31 March Per employee profit during 2015 2016 2017 2018 2019 14-15 15-16 16-17 17-18 18-19 62 65 76 89 114 0.59 0.62 0.65 0.74 0.89 Asset Liability Management 29. The Maturity profile of Assets and Liabilities as on 31 March 2018 is given in Table No.20 Table No. 20– Maturity profile of Assets & Liabilities (₹ crore) 31 Mar 2018 Deposits Advances Investments Borrowings Forex Total Total GAP liabilities Assets Liabilities 4709 7755 01 - 14 days 0 6709 8580 10580 0 15289 10580 -1910 15 - 28 days 3711 5911 5771 216 0 11682 3927 29 days - 3 0 10927 12221 25058 59 23148 25058 months >3 months upto 32932 52257 552 6027 59 52809 38959 13850 6 months >6 months utp 1 47559 82871 485 14351 77 83356 61910 21446 year >1 year upto 3 69410 114935 1770 12900 180 116705 82310 34395 Yrs >3 yrs upto 5 yrs 50546 73038 502 7700 183 73540 58246 15294 19989 83635 7991 0 536 91626 19989 71637 >5 years 224147 430283 37872 1094 468155 300979 167176 76832 Total 30. A comparison of ST Assets & ST Liabilities (< 1 year) and LT Assets & LT Liabilities (> 1 year) is given in Table No.21. Table No.21 – ST & LT Liabilities as on 31 March 2019 (₹ crore) ST Assets ST Liabilities LT Assets LT Liabilities 2017 181488 147654 219377 185370 2018 161592 124738 181236 154613 8 All loans outstanding as on 31 March is taken as ‘business’. The ratio may not match with that give in Annual Report where what is taken as ‘Business’ is not known. 16

Asset Gap in the Liabilities-Assets in one of the buckets in shot term, but not very Liability significant Manage- ment No gap in the Liabilities-Assets in the long term All India Financial Institutions – A comparison 9 31. There are four All India Financial Institutions under the oversight of the Reserve Bank viz., Export Import Bank of India (EXIM Bank) that engage in direct lending by way of term loans and investments, National Bank for Agriculture and Rural Development (NABARD), the Small Industries Development Bank of India (SIDBI) and the National Housing Bank (NHB), which mainly extend refinance to banks and NBFIs. A comparative position of select financial indicators of the four AIFIs during 2016-17 is given in Table No.22. Table No.22 Comparative position of select financial indicators of the AIFIs as on 31 March 2018/ during 2017-18 Financial Assistance Sanctioned (₹ crore) SIDBI NABARD NHB EXIM Bank Financial Assistance Disbursed (₹ crore) Weighted average cost of Resources (%) 58800 217400 44900 77700 Weighted average maturity of Resources (%) 58700 227800 24900 68500 Interest income/ average working funds (%) Non-interest income/ average working funds (%) 5.9 6.8 5.9 8.3 Operating profit/ average working funds (%) 1.7 1.9 3.7 4.1 Return on Assets (%) 6.9 6.5 7.2 7.2 Net profit per employee (₹ crore) 0.5 0.1 0.1 0.5 CRAR (%) 2.3 1.2 2.1 1.7 2.2 0.8 1.2 -0.24 0.13 0.74 0.63 -0.86 26.7 18.9 18.7 10.04 Comparison Not comparable due to completely different nature of madate/functioning of AIFIs NABARD - Largest All India Financial Insitution in size and spread Disbursements by NABARD during 2017-18 more than the combined disbusrsments of the remaining 3 AIFIs Strengths & Weaknesses 32. Based on the above analysis, an attempt has been made to list out the strengths and weaknesses of NABARD’s financial position: 9 Source: Report on Trend and Progress of Banking in India 2016-17, RBI 17

Strengths Good capital base with adequate reserves, strengthened by the recent amendments to the Act While 96% of assets earn, only 77% of liabilities have cost Strong CRAR of 18.85% as against a minimum of 9% stipulated by RBI Own resources (Capital, Reserves & NRC Funds) constitute about 12% The asset portfolio has a very predominant tilt towards loans under all purposes including RIDF (85%) - This indicates NABARD’s commitment to channelize all its resources to different sectors for development of rural areas Reasonably low cost of management as % to AWF; Decreasing trend is positive Good income from treasury operations Low NPAs Business diversification through GoI's support and also through other products like NIDA, etc. Mandated Borrowing for Mandated lending - Pointer to stakeholders' confidence Weaknesses Bloated Balance sheet, bolstered on the liabilities side and asset side by mandated borrowing and mandated lending with fixed margins Very less margin on some of the loan products viz., ST(SAO) Refinance, etc. Low Net Margin/Return on Assets - Critical factors while raising resources from the market Continued reliance on Refinance as bread-winner, though income from other segments improving. Increasing trend in Expenditure as %age to total income 18