RBI sells first green bonds worth ₹8,000 cr at 5-6 bps below sovereign yields

India has sold its first sovereign green bonds worth 8,000 crore on Wednesday, the Reserve Bank of India (RBI) said in statement. However, the yields below comparable government bonds.

The Reserve Bank of India (RBI) has auctioned 4,000 crore worth five year bond at coupon rate of 7.10 per cent, five basis points below the five-year sovereign yield.

The central bank auctioned another 4,000 crore in 10-year bonds at coupon rate of 7.10 per cent at coupon rate of 7.29 per cent, which is six basis points below comparable government securities.

The proceeds from the sale of the green bonds are to be used for ‘green’ projects such as solar power, wind and small hydro projects and other public sector projects that help reduce the economy’s carbon footprint.

A similar sized auction of green bonds is to take place on February 9.

The five-year 7.38% 2027 bond yield was at 7.15%, while the benchmark 7.26% 2032 bond yield was at 7.35% during the time of bidding, reported Reuters.

Investors in these bonds do not bear project related risks, the government specified in its framework released in November.

Ahead of Wednesday’s auction, the government had met foreign investors to gauge demand, and foreign investment restrictions on these securities were lifted, reported news agency Reuters.

The 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.”

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.


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