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Informist, Thursday, Aug 22, 2024

 

By Sagar Sen

 

NEW DELHI - The finance ministry is likely to go slow on further issuances of sovereign green bonds given that the response to the auctions of such bonds has been less than encouraging so far this year, a senior finance ministry official said. The government has barely received any green premium or 'greenium' on such bonds so far this financial year, which prompted it to reject most of the bids for the 120 bln rupees worth of green bonds that were up for auction in Apr-Sep.

 

"It is a new instrument which the government developed after consulting the market participants. The response, however, is very tepid and is not at all satisfactory as a lot of effort and time has gone behind it," the official told Informist.

 

Going ahead, a call will be taken on whether to cut the size of auction of such bonds, the official said. "We are not looking to do away with the green bonds as there is a separate market for these bonds, but if we are getting bids comparable to benchmark 10-year government securities, then it does not make much sense to raise resources from a specialised instrument," the official said.

This comes in the backdrop of the Reserve Bank of India discussing modalities with International Financial Services Centre on trading of sovereign green bonds at the Gujarat International Finance Tec-City, Gandhinagar.

 

"We are in discussion with the IFSC, it will be operationalised very soon. I think Oct-Mar, it will be possible," RBI Governor Shaktikanta Das had said at a press conference following a post-Budget meeting with Finance Minister Nirmala Sitharaman earlier this month. In April, the RBI had announced that it will issue a framework to enable the trading of sovereign green bonds in GIFT City.

 

Green bonds are typically priced at lower yields than regular securities, and the difference between the yields is known as 'greenium'. Investors tend to demand lower yields on green securities as these investments count towards their environmental, social and governance-related investment goals. However, the government's green bond offerings so far have attracted only modest greenium, as Indian investors lack incentives to price such bonds aggressively.  End

 

Edited by Vandana Hingorani

 

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