The National Bank for Agriculture and Rural Development (NABARD) has issued its first-ever social bonds worth Rs 1,040.50 crore. Social bonds, also known as social impact bonds (SIB), are used to fund projects with significant social benefits, addressing issues such as healthcare, education, affordable housing, poverty alleviation, and environmental sustainability. NABARD’s social bonds are AAA-rated and have a base issue size of Rs 1,000 crore, with an option to retain oversubscription up to Rs 2,000 crore. The bonds have a maturity of 5 years and a coupon rate of 7.63 percent. NABARD has also introduced a Sustainability Bond Framework to finance green and social projects.
Facts/Terms for UPSC Prelims
- Social Bonds (SIB): Social bonds, also known as social impact bonds, are financial instruments designed to raise funds for socially beneficial projects, such as healthcare, education, and poverty alleviation. They offer investors a chance to support initiatives with positive social impacts while earning a financial return.
- Pimpri Chinchwad Municipal Corporation (PCMC): PCMC is a municipal corporation located in Pune, Maharashtra, India. It collaborated with the United Nations Development Programme (UNDP) to create India’s first social impact bond, emphasizing the municipality’s commitment to social development.
- AAA Rating: The AAA rating, as assigned by CRISIL and ICRA, indicates the highest level of creditworthiness for financial instruments. It signifies a low risk of default, making the bonds an attractive investment option for risk-averse investors.
- Sustainability Bond Framework: NABARD’s Sustainability Bond Framework outlines guidelines for financing green and social projects. It covers a wide range of projects, including those related to affordable housing, food security, and energy efficiency, promoting sustainability and social well-being.
- National Bank for Agriculture and Rural Development (NABARD): NABARD is a financial institution established by the Indian government to promote sustainable agriculture and rural development. It plays a pivotal role in India’s rural banking system by providing financial support, improving infrastructure, and supervising Regional Rural Banks (RRBs) and Cooperative Banks to foster economic development in rural areas.
