Image Credit - Asiana Times
Foreign investors at the International Financial Services Centre (IFSC) in Gujarat International Finance Tec-City (GIFT City) are expected to begin investing in sovereign green bonds by the second half of the current financial year, according to Reserve Bank of India (RBI) Governor Shaktikanta Das. The announcement, made on August 10, highlights the RBI’s ongoing discussions with the IFSC to operationalize this investment opportunity by FY25’s second half.
GIFT City’s IFSC offers simplified regulations and tax benefits designed to attract both domestic and international financial entities. The move to enable investment in sovereign green bonds aligns with India’s broader goal of reducing the carbon intensity of its economy. Back in April, the RBI had already signalled its intention to allow the trading of these bonds at IFSC, Gandhinagar.
Currently, foreign portfolio investors (FPIs) registered with SEBI can invest in green bonds through various routes available for investing in government securities. The RBI’s decision to allow eligible foreign investors in the IFSC to invest in these bonds is aimed at broadening non-resident participation in sustainable investments.
Although there isn’t an official target for green bond issuance for the full financial year, the Indian government had previously indicated in March that Rs 12,000 crore out of the Rs 7.50 lakh crore total gross borrowings in the first half of FY25 would be raised through the issuance of sovereign green bonds. This move is part of India’s strategy to finance public sector projects that align with sustainable development goals.
The Union Budget 2022-23 initially announced the issuance of Sovereign Green Bonds to help India tap into potential investments aimed at supporting environmental sustainability. The government subsequently revised its gross market borrowing plan for FY25 to Rs 14.01 lakh crore, cutting it by Rs 12,000 crore.