Sovereign green bonds face rupee hurdle in Gift City

Foreign investors in Gujarat's Gift City have yet to warm up to sovereign green bonds five months after the regulatory green light, deterred by their rupee denomination, cooling enthusiasm for green energy, and rising yields in the West.

- Shayan Ghosh & Ram Sahgal

While all Indian government securities are issued in rupees, foreign investors were hopeful that the bonds sold in Gift City would be in dollars. That is because its objective is to be "a jurisdiction that provides financial services to non-residents and residents (institutions) in foreign currency other than rupees".

"As the debt manager to the government, the Reserve Bank of India does not want to issue sovereign securities in dollars. The problem is that investors are not keen on buying rupee securities from the Gift City," a Gift City official said on the condition of anonymity.

Announced in the FY23 Union budget, sovereign green bonds aim to finance public projects focusing on energy transition. In August 2024, the Reserve Bank of India (RBI) allowed eligible foreign investors in Gift City to invest and trade in these bonds. However, investors are not keen on buying rupee-denominated sovereign green bonds in Gift City since they are anyway free to buy them outside it, the official cited above said.