RBI Allows Foreign Investment In IFSC In Sovereign Green Bonds

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SUMMARY

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

This move is aimed at facilitating wider non-resident participation in SGrBs, and thus, it is working on a scheme for investment and trading in SGrBs by eligible foreign investors

This comes days after the Indian government announced that it would borrow INR 12,000 Cr to meet the latest budget needs through issuance of SGrBs

The Reserve Bank of India (RBI) has said that it will allow investment and trading of sovereign green bonds (SGrBs) at the International Financial Services Centre (IFSC), Gandhinagar.

Based on an announcement in the Union Budget for FY 2022-23, the government issued SGrBs in January last year. Subsequently, SGrBs were also issued as part of the government borrowing calendar in FY 2023-24, the central bank said in a statement.

At present, foreign portfolio investors (FPIs) registered with SEBI are permitted to invest in SGrBs under the different routes available for investment by FPIs in government securities, it added.

“With a view to facilitating wider non-resident participation in SGrBs, it has been decided to permit eligible foreign investors in the IFSC to also invest in such bonds,” said RBI governor Shaktikanta Das, while announcing the first bi-monthly policy for FY’25.

This comes days after the government announced that it would borrow INR 12,000 Cr to meet the latest budget needs through the issuance of SGrBs.

The government has been lately pushing plans to boost foreign investment in India through multiple channels.

Das further said that India’s foreign exchange reserve reached an all-time high of $645.6 Bn as of March 29, 2024.

Earlier this year, sovereign wealth fund Abu Dhabi Investment Authority (ADIA) was also reported to be planning to set up a $4.5 Bn fund to invest in the GIFT City.

The sovereign wealth fund is also likely to start investing via the fund as soon as the middle of 2024.

Also recently, the GIFT City officials were reported to have knocked RBI’s doors for consultations on building a dollar payment system mechanism that aims to bring about greater efficiency in transactions conducted in the US currency.

According to media reports, the system in talks could resemble the current Real-Time Gross Settlement System (RTGS).