Finance Minister Approves India's First Sovereign Green Bonds Framework

Union Minister for Finance & Corporate Affairs Nirmala Sitharaman approves the final Sovereign Green Bonds framework of India. This approval will further strengthen India’s commitment towards its Nationally Determined Contribution (NDCs) targets.

Bank Maha Pack includes Live Batches, Test Series, Video Lectures & eBooks

What Is The Need:

The Framework comes close on the footsteps of India’s commitments under Panchamrit as elucidated by the Prime Minister, Narendra Modi, at COP26 at Glasgow in November, 2021. The approval is fulfillment of the announcement in the Union Budget FY 2022-23 by the Union Finance Minister that Sovereign Green Bonds will be issued for mobilising resources for green projects.

It will help in attracting global and domestic investments in eligible green projects. The proceeds generated from issuance of such bonds will be deployed in Public Sector projects which help in reducing carbon intensity of the economy.

Check: List of Finance Ministers of India

What Are Green Bonds:

A green bond is a debt instrument with which capital is being raised to fund ‘green’ projects, which typically include those relating to renewable energy, clean transportation, sustainable water management etc.

- A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental).
- Bonds traditionally paid a fixed interest rate (coupon) to investors.

Benefits Of Green Bonds:

Enhances Reputation:
- Green bonds enhance an issuer’s reputation, as it helps in showcasing their commitment towards sustainable development.
Fulfillment of Commitments:
- Ability to meet commitments, for signatories to climate agreements and other green commitments.
- India’s Intended Nationally Determined Contribution (INDC) document puts forth the stated targets for India’s contribution towards climate improvement and following a low carbon path to progress.
Raised at Lower Costs:
- Green bonds typically carry a lower interest rate than the loans offered by the commercial banks.
- With an increasing focus of foreign investors towards green investments, it could help in reducing the cost of raising capital.