The government today approved Rs 3,000-crore capital infusion over a period of two years

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in National Bank for Agriculture and Rural Development (Nabard) to help the lender mobilise higher resources from the market.

The Union Cabinet approved the proposal for augmenting the capital base of Nabard by infusing Rs 3,000 crore, as the government equity in two instalments of Rs 1,000 crore in 2011-12 and Rs 2,000 crore during 2012-13, Information and Broadcasting Minister Ambika Soni said here.

This would raise the paid up capital of the apex agriculture and rural development bank to Rs 5,000 crore, she said after the Cabinet meeting.

As per RBI's guidelines, the outstanding total resources mobilised at any point of time by a Financial Institution should not exceed 10 times its Net Owned Funds (NOF).

It becomes important to raise NOF such that Nabard's ability to mobilised resources from the market can be enhanced, she said.

The infusion of the additional share capital by the Government of India will increase the NOF and thus the borrowing capacity of Nabard to enable it to extend its various activities, she said.

At present, 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 per cent share capital of Nabard. It is to be noted that the Reserve Bank of India (RBI) divested its 71.5 per cent stake in Nabard to the government last year.