RBI Opens Door For Foreign Investors In IFSC To Invest In Sovereign Green Bonds

The Reserve Bank of India (RBI) has introduced a new scheme allowing foreign investors in the International Financial Services Centre (IFSC) to invest in sovereign green bonds. This move is aimed at increasing non-resident participation in these environmentally focused instruments. The government had initially issued sovereign green bonds (SGrBs) in January 2023, and they were included in the borrowing calendar for the fiscal year 2023-24.

Until now, only foreign portfolio investors (FPIs) registered with SEBI could invest in SGrBs through existing routes for government securities. However, in April, the RBI announced a plan to facilitate wider non-resident participation in these bonds through the Scheme for Trading and Settlement of Sovereign Green Bonds in the International Financial Services Centre in India.

The RBI has now issued a circular permitting eligible foreign investors in the IFSC to invest in these bonds. These investors can participate in the primary auctions conducted by the RBI and engage in secondary market transactions within the IFSC. However, eligible International Banking Units (IBUs) cannot participate in primary auctions but may trade in the secondary market. The Know Your Customer (KYC) verification or due diligence will be conducted according to the IFSC’s prescribed rules and procedures.