The Reserve Bank of India (RBI) has announced its plans to issue bonds in support of sustainable and environmentally friendly projects, as part of its efforts to align with the priorities outlined in the upcoming union budget for 2023.
The Reserve Bank of India (RBI) announced on January 6 that it will issue two tranches of Sovereign Green Bonds worth INR 8,000 crore (INR 16000 in total) on January 25 and February 9.
The bonds, which will have maturities of 5 and 10 years and be worth INR 4,000 crore each, will be sold through a Uniform Price Auction.
The proceeds from the bonds will be used to fund public sector projects aimed at reducing the carbon intensity of India's economy. The Indian government previously announced its intention to raise INR 16,000 crore through Sovereign Green Bonds as part of its overall INR 5.92 lakh crore borrowing in the second half of the year.
5% of the bonds will be reserved for retail investors and will be eligible for Repurchase Transactions (Repo). Sovereign Green Bonds will also qualify as eligible investments for Statutory Liquidity Ratio (SLR) purposes.
Primary dealers will underwrite the bonds in the auction according to the "Revised Scheme of Underwriting Commitment and Liquidity Support" issued by the RBI. In November, the government established a framework for the bonds, with a committee led by the Chief Economic Adviser responsible for selecting eligible projects for financing (excluding large hydropower plants). The payment of principal and interest on the bonds will not depend on the performance of the projects, meaning investors will not bear any project-related risks.
The eligible expenditures will be limited to government expenditures that occurred up to 12 months prior to issuance, and it is expected that all proceeds will be allocated to projects within 24 months of issuance.