RBI Allows Foreign Investors to Invest in Sovereign Green Bonds

• 30 Aug 2024

On 29th August, 2024, the Reserve Bank of India (RBI) introduced a new scheme enabling foreign investors in the International Financial Services Centre (IFSC) to invest in sovereign green bonds, aiming to enhance non-resident participation in these sustainable instruments.

• The scheme permits eligible foreign investors in the IFSC to invest in sovereign green bonds (SGrBs) issued by the Government of India, broadening the investor base for these bonds.
• Sovereign green bonds were first issued in January 2023 as part of the government's initiative to promote sustainable finance and environmental projects.
• Foreign portfolio investors (FPIs) registered with Sebi were already allowed to invest in SGrBs through existing routes for government securities.
• The RBI had previously announced the "Scheme for Trading and Settlement of Sovereign Green Bonds in the International Financial Services Centre in India" in April, to encourage wider non-resident involvement.
• The scheme allows eligible investors to participate in the primary auctions of these bonds conducted by the RBI and trade them in the secondary market within the IFSC.
• However, International Banking Units (IBUs) within the IFSC are not allowed to participate in primary auctions but can engage in secondary market transactions for SGrBs.
• The KYC verification and due diligence for investors under this scheme will be conducted in accordance with the rules set by the IFSC.