RBI unveils plans to raise ₹16000 crore via Sovereign Green Bonds

  • January 7, 2023
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
No Comments

 

 

RBI unveils plans to raise ₹16,000 crore via Sovereign Green Bonds

Subject :Economy

Context:

  • The Reserve Bank of India (RBI) said that the maiden Sovereign Green Bonds (SGrBs) would be issued in two tranches for an aggregate amount of Rs 16,000 crore.
  • The RBI will auction 5-year and 10-year green bonds worth Rs 4,000 crore each on 25 January and on 9 February.
  • The proceeds will be utilised for funding public sector projects seeking to reduce carbon emissions.

Green Bonds

  • Green bonds are issued by companies, countries and multilateral organisations to exclusively fund projects that have positive environmental or climate benefits and provide investors with fixed income payments.
  • The projects can include renewable energy, clean transportation and green buildings, among others.
  • Example of Green Bonds:
  • The World Bank is a major issuer of green bonds and issued $14.4 billion of green bonds between 2008 and 2020.
  • These funds have been used to support 111 projects around the world, largely in renewable energy and efficiency (33%), clean transportation (27%), and agriculture and land use (15%).
  • By the end of 2020, 24 national governments had issued Sovereign Green, Social and Sustainability bonds totalling a cumulative $111 billion.

India’s Sovereign Green Bonds Framework:

  • First announced in the Union Budget 2022-23, the proceeds of these green bonds will be issued for mobilising resources for green infrastructure.
  • Under the framework, the Finance Ministry will, every year, inform the RBI about spending on green projects for which the funds raised through these bonds will be used.
  • The government has decided to issue Sovereign Green Bonds (SGrBs) on January 25 , which is of 5 and 10 years tenor and ₹4,000 crore each.
  • This will be followed up by another tranche of SGrB issuance of 5 and 10 years tenor for ₹4,000 crore each on February 9.
  • Overall, Government will mobilise Rs 16,000 crore through the issuance of green bonds in the current fiscal ending March 2023.

Features of the SGrBs:

  • Issuance Method
    • SGrBs will be issued through Uniform Price Auction (a public sale in which a fixed number of similar things are sold at the same price).
  • Eligibility for Repurchase Transactions (Repo)
    • SGrBs will be eligible for Repurchase Transactions (Repo).
    • SGrBs will also be reckoned as eligible investment for Statutory Liquidity Ratio (SLR) purpose.
  • 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.
  • Eligible Projects:
    • All eligible green expenditures will include public expenditure undertaken 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 select operational expenditures.
    • R&D expenditures in public sector projects that help in reducing the carbon intensity of the economy and enable country to meet its Sustainable Development Goals (SDGs) are also included in the framework.
    • The eligible expenditures will be limited to government expenditures that occurred maximum 12 months prior to issuance of the green bonds.
  • Sectors not included
    • Nuclear power generation, landfill projects, alcohol/weapons/tobacco/gaming/palm oil industries and hydropower plants larger than 25 MW have been excluded from the framework.
  • Where will the proceeds go?
    • The framework sets forth the obligations of the Government of India as a green bond issuer.
    • The proceeds from the green bonds issuance will be deposited in the Consolidated Fund of India (CFI) in line with the regular treasury policy, and then funds from the CFI will be made available for the eligible green projects.
  • Implementing Agency:
    • The Ministry of Finance has constituted a Green Finance Working Committee (GFWC) including members from relevant ministries and chaired by the Chief Economic Advisor.
    • The GFWC will meet at least twice a year to support the Ministry of Finance with selection and evaluation of projects and other work related to the Framework.
economy RBI unveils plans to raise ₹16000 crore via Sovereign Green Bonds