RBI introduces scheme to permits foreign investors in IFSC to invest in sovereign green bonds

The Reserve Bank has introduced a scheme to permit foreign investors in the International Financial Services Centre (IFSC) to invest in sovereign green bonds to facilitate wider non-resident participation in such instruments.

The government issued sovereign green bonds (SGrBs) in January 2023. These were also issued as part of the government borrowing calendar in FY 2023-24.

Currently, foreign portfolio investors (FPIs) registered with SEBI are permitted to invest in SGrBs under the different routes available for FPIs to invest in government securities.

Earlier in April, the Reserve Bank announced the plan -- Scheme for Trading and Settlement of Sovereign Green Bonds in the International Financial Services Centre in India -- to facilitate wider non-resident participation in SGrBs.

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Therefore, RBI issued a circular permitting eligible foreign investors in the International Financial Services Centre (IFSC) to invest in such bonds.

"The scheme shall apply to investments in Sovereign Green Bonds issued by the Government of India by eligible investors in the IFSC in India," the circular said.

Investors can participate in the primary auctions of securities undertaken by the Reserve Bank and transact in the secondary market for securities in the IFSC. Further, eligible IBUs are not permitted to participate in the primary auctions under the scheme but they can undertake transactions in the secondary market, the circular said.

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The KYC verification or due diligence of investors will be undertaken as per the rules and procedures prescribed by the IFSC.

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