Informist, Thursday, Apr 18, 2024
By Krity Ambey and Sagar Sen
NEW DELHI – The government expects a greenium, or green premium, of at least 4-5 basis points on the green bonds that will be issued in 2024-25 (Apr-Mar) as foreign portfolio investors are likely to show greater interest in these bonds this time, a finance ministry official said. The government got a greenium of 0-3 bps on the green bonds issued in the financial year ended March.
Demand from FPIs is set to rise this year due to the inclusion of Indian gilts in global indices and the trading of green bonds at the International Financial Services Centre in Gandhinagar-based GIFT City, the official told Informist. "However, considering the global standards, it would be wrong to expect greenium of 10 bps."
Index provider JP Morgan will include Indian gilts on its Government Bond Index – Emerging Markets from Jun 28, while Bloomberg has proposed to add Indian bonds on its Emerging Markets Local Currency Index from September.
Greenium refers to the premium investors are prepared to pay for green bonds due to its impact on sustainability. Proceeds of these bonds must be invested in projects that have positive environmental or climate benefits selected by the green finance working committee. Green bonds give lower returns to investors while offering certain regulatory incentives, which make them attractive to foreign investors.
The government is set to raise 60 bln rupees through 10-year green bonds in each of the first two quarters of the current financial year. Borrowing through green bonds is part of the government's overall gross borrowing target of 14.13 trln rupees projected for the current year. The government is set to borrow 7.50 trln rupees in the first half of 2024-25.
The Reserve Bank of India is working on modalities for issuance and trading of green bonds at Gujarat International Finance Tec-City, or GIFT City, the official said. "Once the norms are finalised, foreign investors can come to invest and trade in sovereign green bonds. That will give a boost to these bonds, and investors will also get certain tax benefits through this route."
On Apr 5, RBI Governor Shaktikanta Das had announced that foreign investors will be allowed to invest and trade in sovereign green bonds at GIFT-IFSC. GIFT City is a deemed foreign jurisdiction within the Indian territory that the government had set up to boost foreign investments in Indian assets. The government allows significant tax concessions on investments in assets trading in GIFT City. The capital gains are taxed at 9% in GIFT City. However, outside the International Financial Services Centre, the dividend income of foreign portfolio investors is taxed at the treaty rate of the country where the investor is based, or at 20%--India's withholding tax rate, whichever is lower. End
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Informist, Thursday, Apr 18, 2024
By Krity Ambey and Sagar Sen
NEW DELHI – The government expects a greenium, or green premium, of at least 4-5 basis points on the green bonds that will be issued in 2024-25 (Apr-Mar) as foreign portfolio investors are likely to show greater interest in these bonds this time, a finance ministry official said. The government got a greenium of 0-3 bps on the green bonds issued in the financial year ended March.
Demand from FPIs is set to rise this year due to the inclusion of Indian gilts in global indices and the trading of green bonds at the International Financial Services Centre in Gandhinagar-based GIFT City, the official told Informist. "However, considering the global standards, it would be wrong to expect greenium of 10 bps."
Index provider JP Morgan will include Indian gilts on its Government Bond Index – Emerging Markets from Jun 28, while Bloomberg has proposed to add Indian bonds on its Emerging Markets Local Currency Index from September.
Greenium refers to the premium investors are prepared to pay for green bonds due to its impact on sustainability. Proceeds of these bonds must be invested in projects that have positive environmental or climate benefits selected by the green finance working committee. Green bonds give lower returns to investors while offering certain regulatory incentives, which make them attractive to foreign investors.
The government is set to raise 60 bln rupees through 10-year green bonds in each of the first two quarters of the current financial year. Borrowing through green bonds is part of the government's overall gross borrowing target of 14.13 trln rupees projected for the current year. The government is set to borrow 7.50 trln rupees in the first half of 2024-25.
The Reserve Bank of India is working on modalities for issuance and trading of green bonds at Gujarat International Finance Tec-City, or GIFT City, the official said. "Once the norms are finalised, foreign investors can come to invest and trade in sovereign green bonds. That will give a boost to these bonds, and investors will also get certain tax benefits through this route."
On Apr 5, RBI Governor Shaktikanta Das had announced that foreign investors will be allowed to invest and trade in sovereign green bonds at GIFT-IFSC. GIFT City is a deemed foreign jurisdiction within the Indian territory that the government had set up to boost foreign investments in Indian assets. The government allows significant tax concessions on investments in assets trading in GIFT City. The capital gains are taxed at 9% in GIFT City. However, outside the International Financial Services Centre, the dividend income of foreign portfolio investors is taxed at the treaty rate of the country where the investor is based, or at 20%--India's withholding tax rate, whichever is lower. End
Informist Media Tel +91 (11) 4220-1000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2024. All rights reserved.