The Reserve Bank of India (RBI) has introduced the Scheme for Trading and Settlement of Sovereign Green Bonds (SGrBs) within the International Financial Services Centre (IFSC) in India. This scheme is part of the developmental and regulatory policies announced in the Bi-monthly Monetary Policy Statement for 2024-25, dated April 5, 2024. It aims to facilitate the investment and trading of Sovereign Green Bonds by eligible foreign investors within the IFSC.
The scheme’s implementation follows amendments to the Foreign Exchange Management (Debt Instruments) Regulations, 2019, which were notified on August 2, 2024, and published in the Gazette of India on August 7, 2024. With immediate effect, the scheme outlines the rules and procedures for participating entities, with operational guidelines to be issued by the IFSC Authority.
The scope of the scheme encompasses investments in Sovereign Green Bonds issued by the Government of India, specifically targeting eligible investors within the IFSC. Key definitions under the scheme include terms such as “Authorised depository,” “Authorised clearing corporation,” and “Back-to-back arrangement,” which define the roles and operational mechanisms within the IFSC for the trading and settlement of these bonds.
Eligible investors include persons resident outside India, as defined under the Foreign Exchange Management Act (FEMA), 1999, and the IFSC regulations, provided they are not incorporated in high-risk jurisdictions identified by the Financial Action Task Force (FATF). Additionally, International Financial Services Centre Banking Units (IBUs) of foreign banks without a branch or subsidiary in India are also eligible to participate in the scheme.
The scheme details the types of eligible securities, primarily Sovereign Green Bonds issued by the Government of India. The trading and settlement processes are specified for both the primary and secondary markets, with particular emphasis on compliance with regulations and guidelines issued by the RBI and the Government of India. In the primary market, investors can participate in auctions conducted by the RBI, while in the secondary market, trading can occur between investors and eligible IBUs, with strict conditions to avoid market abuse.
The scheme also addresses other critical aspects, such as data management, reporting requirements, and taxation, ensuring transparency and compliance with the applicable laws. The RBI reserves the right to publish anonymized trade data and share relevant information with government and regulatory authorities as necessary.
