Published on: January 10, 2023

Green Bonds

Green Bonds


usefully Why in news? The RBI will issue Sovereign Green Bonds worth Rs 16,000 crore, in two tranches of Rs 8,000 crore each, in the current financial year


Divinópolis Highlights

  • The RBI will sell two bonds maturing in five years and 10 years
  • Bonds will be issued through Uniform Price Auctions
  • Considered eligible investments for statutory liquidity ratio and repo purposes.
  • With the ambition to significantly reduce the carbon intensity of the economy, the Union Budget 2022-23 announced the issue of Sovereign Green Bonds

What is sovereign  Green Bonds  ?

  • Green Bonds are issued for mobilising resources for green infrastructure, which primarily refers to deploying the mobilised funds in public sector projects which help in reducing the carbon intensity of the economy.
  • NRIs are allowed to invest in them

Frame work

  • Payments of principal and interest on the issuances under this Framework are not conditional on the performance of the eligible projects

Right to modify this Framework

  • Department of Economic Affairs, Ministry of Finance

Excluded Projects under Project

  • Projects involving new or existing extraction, production and distribution of fossil fuels, including improvements and upgrades; or where the core energy source is fossil-fuel based
  • Nuclear power generation
  • Direct waste incineration
  • Alcohol, weapons, tobacco, gaming, or palm oil industries
  • Renewable energy projects generating energy from biomass using feedstock originating from protected areas
  • Landfill projects
  • Hydropower plants larger than 25 MW

Green Finance Working Committee

  • Will meet at least twice a year to support Ministry of Finance with selection and evaluation of projects

Management of Proceeds

  • The proceeds will be deposited to the Consolidated Fund of India (CFI)

What is Uniform Price Auction?

  • RBI will auction the bonds with bidders will have to quote the interest rate
  • The lowest bid ( Interest rate ) is considered first and then progressively higher bid considered until the RBI decides on appropriate price/ interest rate
  • The interest rate decided is uniform price at which all bonds will be sold
  • Participants who made a bid of the uniform price or lower are the winning bidders of the auction