Reserve Bank of India Says No Foreign Investment Cap on Sovereign Green Bonds

The sovereign green bonds issued by the Indian government will not have any restrictions on foreign investment, the Reserve Bank of India said. Such securities will be counted as specified securities under the fully accessible route, the central bank said in a notification. The RBI had earlier this month announced an auction of 160 billion rupees ($1.93 billion) of sovereign green bonds in two tranches.

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More About This Move:

The fully accessible route (FAR) introduced by RBI wherein certain specified categories of Central Government securities are opened fully for non-resident investors without any restrictions, apart from being available to domestic investors as well. Now, the central bank has added sovereign green bonds to the list too.

Significance of Sovereign Green Bonds:

• SGrBs will be issued through Uniform Price Auction.
• 5% of the notified amount for sale will be reserved for retail investors.
• SGrBs will be eligible for trading in the secondary market.
• SGrBs will be reckoned as eligible investment for SLR purpose.

Benefits of Sovereign Green Bonds:

• Issuance of SGrBs is expected to support the government in tapping the requisite finance from potential investors for deployment in public sector projects aimed at reducing the carbon intensity of the economy.
• Investors in bonds issued under SGrB framework do not bear any project-related risks.
• The Centre is committed to reducing the Emissions Intensity of its GDP by 45% by 2030, from the 2005 level, and achieving about 50% cumulative electric power installed capacity from nonfossil fuel-based energy resources by 2030.