In the government’s first-ever debt sale of this kind, the Reserve Bank of India will auction off sovereign green bonds worth 160 billion rupees ($1.93 billion) in two tranches, the central bank announced on Friday. The 5-year and 10-year green bond auctions will be held by the RBI on January 25 and February 9 and will each be worth 40 billion rupees, according to the announcement from the central bank.
As Asia’s third-largest economy tries to leverage the local debt market to finance green infrastructure projects, Finance Minister Nirmala Sitharaman revealed the proposal to issue sovereign green bonds in the 2022u201323 budget. According to the RBI, the money will go toward solar, wind, and small hydropower projects as well as other public sector projects which contribute in reducing the carbon intensity of the economy. Public sector projects proposed by government departments will be chosen for green funding by a working committee on green finance, led by the chief economist V Anantha Nageswaran.
Video Courtesy: Business Standard
According to the government, environmental experts and members from the ministry of environment, forestry, and climate change will advise the committee on its selection. Every year, the committee will choose new projects and make sure they are funded within 24 months of the bond sale’s date of issuance. Market participants anticipate that foreign banks and investors will participate actively in the auction, but they do not anticipate any significant interest from local investors.
Local primary dealers may not be able to do much, a trader with a primary dealership said, since there hasn’t been a major briefing regarding green bonds and since the announcement of the issuance, foreign banks have been in constant touch with the government.
The purchase of green bonds might count towards the statutory liquidity ratio (SLR), which is the minimum share of deposits that commercial banks must invest in liquid securities like government bonds. Additionally, the purchase of green bonds will be recognised as a specific security under the Fully Accessible Route for foreign investors, where an unlimited amount of investment is permitted.
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