Reserve Bank of India (RBI) has announced its first Sovereign Green Bonds (SGrBs) and said that these will be issued in two tranches for a total amount of Rs 16,000 crore. The proceeds will be used to finance public sector projects seeking to reduce carbon emissions.
The RBI said in a statement that the first auction will be held on January 25 while the second one will be held on February 9. This income will be invested in public sector projects, which helps reduce the carbon intensity of the economy.
As announced in the Union Budget 2022-23, the central government will issue Sovereign Green Bonds (SGrBs) to raise resources for green infrastructure as part of its overall market borrowings.
These green bonds will be available in tenors of 5 years and 10 years. The first tranche will be released on January 25 for Rs 8,000 crore – for 5 years and Rs 4,000 crore for 10 years. The second tranche will be auctioned on February 9 for Rs 8,000 crore – Rs 4,000 crore each for 5 years and 10 years.
Features of Sovereign Green Bond:
Issuance Method: The SGrBs will be issued through a par value auction.
Non-Competitive Bidding Facility: Five per cent of the notified amount of the sale shall be reserved for retail investors as specified under the ‘Scheme for Non-Competitive Bidding Facility in the Auction of Government of India Dated Securities and Treasury Bills’.
Eligibility for Repurchase Transaction (Repo): SGrBs will be eligible for repurchase transactions (Repo) as per the terms and conditions specified in the Repurchase Transactions (Repo) Directions, 2018, as amended from time to time.
Eligibility for Statutory Liquidity Ratio (SLR): SGrBs will be counted as eligible investment for SLR purposes.
Underwriting: Underwriting in the auction of SGrB by Primary Dealers will be in accordance with the “Revised Scheme of Underwriting Commitment and Liquidity Support” issued by the Reserve Bank vide circular No.RBI/2007-08/186 dated November 14, 2007, as amended. From time to time.
When to continue trading: SGrB will be eligible for “When Issued” trading in accordance with the guidelines on ‘When Issued Market Transactions in Central Government Securities’ issued by the Reserve Bank of India vide circular No. RBI/2018-19/25 dated July 24. 2018, as amended from time to time.
Business Qualification: SGrB will be eligible for trading in the secondary market.
Investment by Non-Residents: SGRBs will be designated as specified securities under the ‘Fully Accessible Route’ for investment in Government securities by non-residents.
In the half-yearly issuance calendar for marketable dated securities for the second half of the financial year 2022-23 on September 29, 2022, it was notified that SGRBs would be issued for an aggregate amount of Rs 16,000 crore. Since then the Government of India has issued the Sovereign Green Bond Framework on November 9, 2022.
“The Government of India has issued the Sovereign Green Bond Framework on November 9, 2022,” RBI said.
Announcing the guidelines, Finance Minister Nirmala Sitharaman had said in November that the framework would strengthen India’s commitment to the Nationally Determined Contribution (NDC) targets adopted under the Paris Agreement as well as promote global and national participation in eligible green projects. Will help attract domestic investment.
In her 2022-23 budget speech in February last year, Sitharaman had announced that sovereign green bonds would be issued to raise resources for green projects. Prime Minister before Narendra Modi In November 2021, India’s commitments under ‘Panchamrit’ were announced to reduce carbon emissions.
The proceeds from the issuance of green bonds cannot be used for the extraction, production and distribution of fossil fuels or where the main energy source is fossil fuel based, and for nuclear power projects.
All eligible green expenditure will include public expenditure made by the government in the form of investment, subsidies, grants-in-aid, or tax foregone (or a combination of all or some of these) or selected operating expenditure.
This framework applies to all sovereign green bonds issued by the government. Investors in bonds issued under the framework do not bear any project related risk.
(With inputs from PTI)
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