Informist, Thursday, Aug 29, 2024

--NABARD chairman: Plans to raise funds via infra+green bonds in FY25

--NABARD chairman: May raise 70-100 bln rupees via infra+green bond

By Kabir Sharma and Sachi Pandey

MUMBAI – The National Bank for Agriculture and Rural Development is likely to raise funds through a combination of infrastructure and green bonds, Chairman Shaji K.V. told Informist on the sidelines of the Global Fintech Fest today.

The development bank may tap the debt market this financial year to raise 70-100 bln rupees through this combination, he said.

"We were planning social bonds but we did not get that premium that we expected, so now we are planning to have a green bond. There also, yes, greenium is not available, but still, now we need to be there in that space," Shaji said.

"We are actually looking at some infra (infrastructure) plus green. We are now trying to push ourselves as an infra provider, in that case, we need to trace the sources. So we are looking at, maybe around 7,000 crores (70 bln rupees) to 10,000 crore (100 bln rupees)," he said.

Green bonds are a type of fixed-income offering used to fund projects that have positive environmental impact. Unlike traditional bonds, green bonds offer investors a stated return and a promise to use the proceeds to finance or refinance sustainable projects, either in part or whole.

Such 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.

"The investors feel that they need to be given premium rather than the other side. Even the government of India also, when they came out with green bonds, they didn't get anything. So now they are feeling that to attract investors from abroad to such bonds, we have to incentivise them to come in, but rather they should incentivise us. That's not happening," Shaji said.

The government's green bond offerings so far have attracted only modest greenium, as Indian investors lack incentive to price such bonds aggressively. So far in the current financial year, the government has raised only 16.97 bln rupees out of the stipulated 120 bln rupees set to be raised in Apr-Sep through green bonds as it did not find favourable bids. On May 31, the Reserve Bank of India rejected all bids for 60 bln rupees worth of a new 10-year green paper as the government did not want to pay a yield higher than on the 10-year benchmark bond. Green bond offerings by Indian corporates have also been sporadic so far in the current financial year.

Shaji added that there are several compliances which are required to be met to raise funds through green bonds. "We are planning this FY (financial year), but for that a lot of documentation needs to be done. So we have come out with the green taxonomy which is being discussed at the government of India level...we are one of the first entities to come out with green taxonomy, so we will make use of that," Shaji said.

Green taxonomy is a classification system that defines which economic activities and assets are considered environmentally sustainable or "green". It also establishes a common framework that helps make decisions based on sustainable criteria.

So far in the current financial year, NABARD has raised 195.58 bln rupees through bonds. End

Edited by Ashish Shirke

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