Wednesday, 18 June 2025
The National Bank for Agriculture and Rural Development (NABARD) has received approval to raise Rs 19,500 crore through deep-discount zero-coupon bonds, with maturities stretching over 10 years, 11 months, and 13 days. The fundraising window will remain open until the end of March 2027. These long-tenor bonds will enable NABARD to mobilise low-cost, long-term capital for financing rural infrastructure and agriculture-focused initiatives. The move is expected to strengthen NABARD’s capacity to support key developmental programmes in India’s rural economy.
India’s National Bank for Agriculture and Rural Development (NABARD) has secured federal approval to raise up to Rs 19,500 crore (approximately $2.3 billion) through deep-discount zero-coupon bonds, according to an official document released Friday. The bonds, which mature in 10 years, 11 months, and 13 days, can be issued until March 2027.
These zero-coupon instruments, typically issued at a discount of 20–25 per cent or more to face value, offer no regular interest payouts but are redeemed at full value upon maturity. This structure eliminates reinvestment risk and can provide tax efficiency under prevailing capital gains norms, making them an attractive option for long-term investors—especially during a softening rate cycle.
NABARD’s approval marks the fifth such clearance since March 2025, and is the largest amount sanctioned under this rare debt structure so far. Earlier approvals were granted to Power Finance Corporation (Rs 10,000 crore), REC, Housing and Urban Development Corporation (HUDCO), and Indian Railway Finance Corporation (IRFC), all with fundraising windows open until March 2027.
However, investor demand for these instruments has recently been muted. A planned deep-discount bond issuance by Power Finance Corporation on June 9 had to be withdrawn after receiving bids worth just Rs 1,470 crore against a Rs 2,000 crore target.
“Zero-coupon bonds have hit a rough patch lately due to weak investor appetite and upward pressure on yields,” said Venkatakrishnan Srinivasan, founder and managing partner at debt advisory firm Rockfort Fincap. “But this near-term hiccup doesn’t change their structural appeal—especially when priced right in a softening rate environment.”
Srinivasan added that the instruments’ long duration lock-in and potential tax benefits could attract interest if market conditions stabilise.
Despite short-term headwinds, the move underlines NABARD’s efforts to tap innovative financing mechanisms to support its core mandate—advancing agriculture and rural development across India.
