India's sovereign green bonds
Intuition
A sovereign green bond is a government bond whose proceeds are matched to green public spending. India's sovereign green bonds (SGrBs) are issued by the Government of India through RBI auctions, just like other government securities. They carry the same credit risk as any other central government bond.
Money is fungible at the government level too. The proceeds go into the government's general pool of funds, and an equal amount is then allocated to eligible green spending, such as metro rail, electric locomotives and solar schemes. So the question is not whether the bond is safe, but whether the green spending is real, reported and additional.
The bonds have a second purpose. They give the market a green government yield curve, which other green issuers can use as a pricing benchmark.
Mechanics
The framework (9 November 2022)
- Aligned with ICMA's Green Bond Principles.
- Nine eligible categories: renewable energy, energy efficiency, clean transportation, climate change adaptation, sustainable water and waste management, pollution prevention and control, green buildings, sustainable management of living natural resources and land use, and terrestrial and aquatic biodiversity conservation.
- Excluded sectors include fossil fuels, nuclear energy and direct waste incineration.
- A Green Finance Working Committee, chaired by the Chief Economic Adviser with members from the Ministry of Finance, the Ministry of Environment and NITI Aayog, selects projects and oversees reporting. It meets at least twice a year and keeps a pipeline of extra eligible projects in case some are delayed.
- CICERO gave the framework a second-party opinion of "Medium Green".
- The aim is to allocate the proceeds within 24 months of issue.
Issuance record
| Year | Issued or planned | Notes |
|---|---|---|
| FY 2022-23 | ₹16,000 crore in two tranches of ₹8,000 crore (25 January and 9 February 2023), in 5-year and 10-year bonds | The first issue |
| FY 2023-24 | ₹20,000 crore in four tranches of ₹5,000 crore (November 2023 to February 2024): two 30-year, one 10-year and one 5-year | |
| FY 2024-25 | Weak demand. The ₹6,000 crore auction of 31 May 2024 was cancelled. On 2 August 2024, only ₹1,697 crore of ₹6,000 crore was accepted. The auctions of 29 November 2024 and 31 January 2025 were largely devolved on primary dealers | Banks were unwilling to pay the greenium the government wanted on 10-year bonds |
| FY 2025-26 | ₹10,000 crore planned for the first half, in two 30-year tranches of ₹5,000 crore | Long bonds suit insurers and pension funds |
| FY 2026-27 | First half: three 30-year auctions of ₹5,000 crore (April, June and August 2026). Second half: five 30-year auctions of ₹3,000 crore (late September 2026 to January 2027) | ₹30,000 crore planned for the year |
In the August 2026 auction, the government sold ₹5,000 crore of a green bond maturing in 2056 at a cut-off yield of 7.3169%, with no devolvement on primary dealers. Reuters estimated a greenium of about 4 basis points and put total sovereign green bonds outstanding at about ₹87,700 crore.
Use of the money (FY 2023-24 allocation report)
The Department of Economic Affairs reported ₹20,785.60 crore allocated against the ₹20,000 crore raised that year. The extra ₹785.60 crore came from general revenue.
| Category | Amount (₹ crore) | Share |
|---|---|---|
| Clean transportation (metro rail equity in several cities, and ₹9,928.99 crore for energy-efficient electric locomotives) | 16,087.99 | About 77% |
| Renewable energy (rooftop solar phase II ₹2,661.48 crore, PM-KUSUM ₹1,000.58 crore, wind ₹916.30 crore, green hydrogen mission ₹0.11 crore) | 4,578.47 | About 22% |
| Sustainable land use (National Mission for a Green India) | 119.14 | Under 1% |
| Total | 20,785.60 | 100% |
Foreign access through GIFT City
Before 2024, foreign investors could buy SGrBs only through the usual routes for registered foreign portfolio investors. In 2024, RBI introduced a scheme for trading and settlement of SGrBs in the International Financial Services Centre (IFSC) at GIFT City. Eligible foreign investors in the IFSC can now bid in RBI's primary auctions and trade the bonds within the IFSC.
Sources
- Department of Economic Affairs: Sovereign Green Bonds Allocation Report FY 2023-24
- Outlook Business: RBI to issue green bonds in two tranches of ₹8,000 crore each
- Business Standard: H1 borrowing calendar, 30-year green bonds likely to see strong demand (March 2025)
- RBI: Issuance calendar for April to September 2026
- RBI: Issuance calendar for October 2026 to March 2027
- Serrari Group (citing Reuters): India sovereign green bond locks in a 4 bp greenium (August 2026)
- Board Stewardship: RBI opens door for foreign investors in IFSC to invest in sovereign green bonds
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