RBI Released Rules and Guidelines For Investment in SGrBs by Foreign Investors

The Reserve Bank of India (RBI) has taken a significant step to encourage wider foreign participation in India’s sovereign green bonds (SGrBs). The central bank has introduced a new scheme that allows foreign investors in the International Financial Services Centre (IFSC) to invest directly in these environmentally-friendly securities.

SGrBs, issued by the Indian government, are a crucial tool for financing green projects and combating climate change. The RBI aims to attract additional capital inflows and bolster India’s green finance initiatives by expanding access to these bonds to foreign investors.

The scheme, announced in April 2024, outlines the procedures for eligible foreign investors to participate in both primary auctions and secondary market transactions for SGrBs within the IFSC. This move is expected to enhance liquidity and broaden the investor base for these bonds.

While the scheme is open to a wide range of foreign investors, it excludes International Banking Units (IBUs) from participating in primary auctions. However, IBUs can still engage in secondary market transactions for SGrBs.

The RBI has emphasized that all investors, regardless of their origin, will be subject to stringent Know Your Customer (KYC) verification and due diligence procedures to ensure compliance with regulatory standards.

What are Sovereign Green Bonds?

Sovereign Green Bonds” (SGrB) refers to government-issued debt instruments used to fund initiatives to lower carbon intensity and ease the transition to a low-carbon economy. These bonds can be traded on the securities market and have coupon rates. The money borrowed by the government overall includes money raised through SGrB.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.