The thinking behind issuing a green bond is to seek out international investors. (Representative Image)
The Reserve Bank of India (RBI) on January 25 raised Rs 8,000 crore through maiden sovereign green bonds maturing in 10-year and 5-year, and sets yields over six basis points (bps) below the current normal sovereign benchmark bonds.
It set 7.29 per cent cut-off yield on the country’s maiden 10-year sovereign green bonds (SGrB) or NEW GOI SGrB 2033 and 7.10 per cent cut-off yield on the NEW GOI SGrB 2028, release said.
As per the full results, the issue received competitive bids worth Rs 19,367 crore on 10-year SGrB, of which RBI accepted bids worth Rs 3,948.646 crore. Similarly, they received non-competitive bids worth Rs 51.354 crore and it accepted full bids.
On the 5-year SGrB, they accepted competitive bids worth Rs 3,993.124 crore and Rs 6.876 crore worth Non-Competitive Bids.
Premium or greenium on the yields on these bonds is the difference between regular sovereign bond auctions and green bond auctions. It is also called as pricing benefit, which issuers enjoys globally by selling environment-friendly bonds or securities.
Currently, the yield on 10-year benchmark 7.26 percent 2032 bonds were at 7.3502 percent, and 7.38 percent 2027 bonds were at 7.1572 percent.
A green bond is a debt security that is issued to raise capital to support climate-related or environmental projects, according to the World Bank. Sovereign green bonds are issued by governments to raise resources for such projects.
Sovereign bonds are different from sovereign green bonds as funds raised through latter will be utilized for green infrastructure. It means these funds will be utilized in the projects which will help in reducing the carbon intensity of the economy.
Earlier today, the central bank set 13 paise and 14 paise underwriting fee on the NEW GOI SGrB 2028 and NEW GOI SGrB 2033, respectively.
The government in the Union Budget for FY23 had announced the issue of maiden green bonds.
The government, in the second half borrowing calendar, had announced raising Rs 16,000 crore through sovereign green bonds, which will be part of the overall Rs 5.92 lakh crore borrowing in the second half.
The second auction of these bonds will take place on February 9.
In November last year, the government announced the framework for sovereign Green Bonds, with a committee headed by the chief economic adviser being put in place to select eligible projects for financing, which do not include large hydropower plants.
As per the framework, the payment of principal and interest on the green bonds will not depend on the performance of the eligible projects. As such, investors will not bear any project-related risks.
"The eligible expenditures are limited to government expenditures that occurred a maximum of 12 months prior to issuance. It will be endeavored that all the proceeds get allocated to projects within 24 months following issuance," the framework said.
Earlier this week, the central bank announced a fully accessible route (FAR) for investment by non-residents in government securities, including sovereign green bonds.
The FAR includes securities that do not have any capping on holdings by foreign investors.
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