Ahead of starting proposed trading of Sovereign Green Bonds (SGrB) at International Financial Services Centre (IFSC), Foreign Portfolio Investors (FPIs) have been permitted to buy and sell such bonds in the said centre.
“Persons resident outside India that maintain a securities account with a depository in IFSC in India may purchase or sell Sovereign Green Bonds issued by the Government of India, as per terms and conditions specified by the Reserve Bank,” an amendment in Foreign Exchange Management (Debt Instruments) Regulations said. The amendment has been notified by the RBI.
Last Saturday, RBI Governor Shaktikanta Das said trading of sovereign green bonds can commence at the International Financial Services Centre in Gujarat during the second half of the current fiscal. “We are in discussion with the IFSC, it will be operationalised very soon. I think in the second half (of the current financial year), it will be possible,” Das said.
Meanwhile, the notification said that the amount of consideration for purchase of SGrB issued by the Government of India by FPI shall be paid out of inward remittance from abroad through banking channels or out of funds held in a foreign currency account. Also, the sale/ maturity proceeds (net of taxes, as applicable) of instruments held by persons resident outside India may be remitted outside India.
In April, the Reserve Bank of India (RBI) had announced that it will issue a framework to enable the trading of sovereign green bonds in GIFT City. The government has been raising funds through green bonds since 2022-23 and has raised a total of Rs 36,000 crore in the last two years. So far in the current financial year, the government has raised only Rs 1,697 crore out of the stipulated Rs 12,000 crore scheduled to be raised in the first half ending in September through green bonds as it did not find favourable bids.
Asked about the tepid response from investors to such bond issuance, Das said, “as the debt manager of the government, we are watchful of what exactly is happening and if something needs to be done, we will interact with the government and deal with it.” He further said, one major announcement in this year’s budget about developing a climate taxonomy. “I think that will have a significant long-term impact on mobilisation of funds for the green sector, not only through green bonds but also overall financing of the green sector,” he said.
In her Budget speech for FY25, Finance Minister Nirmala Sitharaman said “We will develop a taxonomy for climate finance for enhancing the availability of capital for climate adaptation and mitigation. This will support achievement of the country’s climate commitments and green transition.”
SgrB was announced in the Union Budget of FY 23. It was said that as a part of the government’s overall market borrowings in 2022-23, sovereign Green Bonds will be issued for mobilizing resources for green infrastructure. The proceeds will be deployed in public sector projects which help in reducing the carbon intensity of the economy.