No cap for foreign investors in sovereign green bonds ahead of ₹16,000 cr issue: RBI
1 min read 23 Jan 2023, 09:35 PM ISTIn Union Budget 2022-23, the government announced to the issue of sovereign green bonds (SGrBs) as part of its market borrowings, for mobilising resources for green infrastructure.
PremiumThe Reserve Bank of India (RBI) on Monday announced a fully accessible route (FAR) for investments by non-residents in government securities inclusion of sovereign green bonds. The FAR includes securities that do not have any capping on holdings by foreign investors.
In its notification, RBI said, "it has now been decided to also designate all Sovereign Green Bonds issued by the Government in the fiscal year 2022-23 as ‘specified securities’ under the FAR."
This has come into force with immediate effect.
The 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.
This comes ahead of two new auctions in sovereign green bonds for fiscal year FY23.
In Union Budget 2022-23, the government announced to the issue of sovereign green bonds (SGrBs) as part of its market borrowings, for mobilising resources for green infrastructure.
That said, RBI has announced the issuance of SGrBs of ₹8,000 crore on January 25, 2023, followed by another issuance of ₹8,000 crore on February 9th -- taking the total issuance of SGrBs to ₹16,000 crore.
The proceeds from this issuance will be used in public sector projects which help in reducing the carbon intensity of the economy.
RBI said, "SGrBs will be designated as specified securities under the ‘Fully Accessible Route’ for investment in Government Securities by non-residents."
Additionally, 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.
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.
Notably, 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.
