RBI to issue green bonds worth Rs 16,000 cr in two tranches in Jan, Feb

The Reserve Bank of India (RBI) has said that sovereign green bonds (SGrBs) worth Rs 16,000 crore will be auctioned in two tranches in January and February. The central bank on Friday said that 5-year and 10-year green bonds worth Rs 4,000 crore each will go under the hammer on January 25 and February 9.  

In a press announcement, the central bank said that the proceeds of these auctions will be deployed in public sector projects which help in reducing the carbon intensity of the economy. The auction would be a uniform price auction, the central bank said. 

“As announced in the Union Budget 2022-23, the Government of India, as part of its overall market borrowings, will be issuing Sovereign Green Bonds (SGrBs), for mobilising resources for green infrastructure,” the RBI said in the press note. 

The central bank said that it was notified in the half-yearly issuance calendar for marketable dated securities for the second half of the fiscal year 2022-23 on September 29, 2022, that SGrBs for an aggregate amount of Rs 16,000 crore would be issued. The Government of India has issued the Sovereign Green Bond Framework on November 09, 2022. 

Feature of sovereign green bonds 

The Centre has said the Sovereign Green Bonds' objective is to mobilise resources for green infrastructure as part of the government’s overall market borrowings in 2022-23. Its features are as follows: 

• Issuance Method: SGrBs will be issued through Uniform Price Auction. 
• Non-competitive bidding facility: About 5 per cent of the notified amount of sale will 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 Transactions (Repo): SGrBs will be eligible for Repurchase Transactions (Repo) as per the terms and conditions mentioned in Repurchase Transactions (Repo) (Reserve Bank) Directions, 2018 as amended from time to time. 
• Eligibility for Statutory Liquidity Ratio (SLR): SGrBs will be reckoned as eligible investment for SLR purposes. 
• Underwriting: The underwriting in the auction of SGrBs by the Primary Dealers will be as per 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-issued Trading: SGrBs will be eligible for “When Issued” trading in accordance with the guidelines on ‘Transactions in the When Issued market 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. 
• Tradability: SGrBs 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. 

Govt’s framework on Sovereign Green Bonds 

The Centre announced a framework for sovereign Green Bonds in November 2022, with a committee, headed by the chief economic advisor, to look into eligible projects for financing, which do not include large hydropower plants. 

The framework states that the payment of principal and interest on the green bonds will not depend on the performance of the eligible projects. Therefore, investors will not bear any project-related risks. 

“The eligible expenditures are limited to government expenditures that took place a maximum of 12 months prior to issuance. It will be endeavoured that all the proceeds get allocated to projects within 24 months following issuance,” the framework said.