Reserve Bank of India to Issue Sovereign Green Bonds

January 7, 2023

The Reserve Bank of India (RBI) has announced its plans to issue Sovereign Green Bonds worth Rs 8,000 crore in two tranches on January 25 and February 9. The proceeds of the bonds will be used to fund public sector projects aimed at reducing the carbon intensity of India’s economy.

Details of the Bonds

The bonds will be sold in two denominations maturing in five years and ten years, worth Rs 4,000 crore each. They will be issued through Uniform Price Auctions and 5% of the total amount will be reserved for retail investors. The bonds will also be eligible for Repurchase Transactions (Repo) and can be used as eligible investments for Statutory Liquidity Ratio (SLR) purposes. Primary dealers will be able to participate in the auction through the “Revised Scheme of Underwriting Commitment and Liquidity Support” issued by the RBI.

Government Borrowing Plans

The Indian government had previously announced its intention to raise Rs 16,000 crore through sovereign green bonds as part of its second half borrowing calendar. The bonds will be part of the government’s overall Rs 5.92 lakh crore borrowing target for the second half of the year.

Framework for Sovereign Green Bonds

In November of last year, the government released a framework for sovereign Green Bonds. The framework established a committee headed by the Chief Economic Adviser to select eligible projects for financing. The payment of principal and interest on the bonds will not be dependent on the performance of the selected projects, meaning that investors will not bear any project-related risks. The eligible expenditures for the bonds will be limited to government expenditures that occurred a maximum of 12 months prior to issuance, with the goal of allocating the proceeds to projects within 24 months of issuance.

« Previous Post Next Post »