RBI Designates 10-Year Sovereign Green Bonds Under FAR for Non-Resident Investments

The Reserve Bank of India (RBI) has expanded the list of Government securities available for non-resident investment under the Fully Accessible Route (FAR) by designating 10-year Sovereign Green Bonds (SGrBs) as ‘specified securities.’ These bonds will be issued by the government in the second half of the fiscal year 2024-25, aligning with the increasing global inclusion of Indian Government Securities (G-Secs) in international bond indices, such as JPMorgan Chase’s GBI-EM GD index, Bloomberg EM Local Currency Government indices, and FTSE Russell’s EMGBI.

10-Year Sovereign Green Bonds in FAR

The RBI’s move to include 10-year Sovereign Green Bonds under FAR comes as the government plans to issue these bonds as part of its borrowing program in FY2024-25. The second half of the fiscal year will witness the government raising ₹6.61 lakh crore, including ₹20,000 crore via four SGrB issuances: two bonds of 10-year tenor and two of 30-year tenor, each valued at ₹5,000 crore.

Background on Fully Accessible Route

The FAR was introduced by the RBI in consultation with the Government in 2020 to provide a separate investment channel for non-residents. Eligible investors, such as Foreign Portfolio Investors (FPIs), Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), and other permitted entities, can invest in specified Government of India securities without any investment ceilings.

Past and Future Investments

Sovereign Green Bonds first appeared on the FAR list in 2022-23. In the current fiscal year, the government plans to borrow ₹20,000 crore through these bonds, with the RBI recently announcing their inclusion. This move is part of India’s broader strategy to align with global standards and attract international capital by issuing green securities that also contribute to sustainable development.

Summary of the News