Features of the SGrB

Features of Sovereign Green Bonds (SGrB)

Sovereign Green Bonds (SGrB) are debt instruments issued by the government to finance environmentally sustainable projects. They are a crucial tool for mobilizing capital towards green initiatives.

These bonds are eligible for Repurchase Transactions (Repo), which means they can be used as collateral for short-term borrowing, enhancing their liquidity in the market.

Furthermore, SGrBs are reckoned as eligible investments for Statutory Liquidity Ratio (SLR) purposes. This makes them attractive for commercial banks, as they can hold these bonds to meet their mandatory SLR requirements.

Sovereign Green Bonds are also eligible for trading in the secondary market, providing investors with an exit option and contributing to market liquidity.

Management of Sovereign Green Bonds

The proceeds from Sovereign Green Bonds are deposited into the Consolidated Fund of India. This central fund manages all government revenues and expenditures.

To ensure transparency and accountability, the allocation and utilization of Green Bonds are subject to audit by the Comptroller and Auditor General (CAG) of India. This oversight mechanism ensures funds are used for their intended green purposes.

Advantages of Sovereign Green Bonds

Indian green bonds serve a dual purpose. They not only support the nation's sustainability goals but also contribute to strengthening the Indian currency.

The increasing global demand for socially responsible investments, coupled with a limited supply of high-quality green bonds, can lead to an increase in their price and yield, benefiting investors.

Sovereign Gold Bond Scheme (SGB) - Overview

The Sovereign Gold Bond (SGB) Scheme is a government-backed initiative aimed at reducing demand for physical gold.

The government is also actively deliberating on the future strategy and potential modifications for the Sovereign Gold Bonds (SGB) scheme itself.

Status of the Gold Industry in India

India holds substantial gold reserves. As per the National Mineral Inventory 2015, total reserves/resources of gold ore in India are estimated at 501.83 million tonnes.

Despite these reserves, Karnataka accounts for approximately 80% of India’s total gold output. The historic Kolar Gold Fields (KGF) in Kolar district is renowned as one of the world's oldest and deepest gold mines.

India is the world's second-largest gold consumer. In 2023-24, India's gold imports increased by 30%, reaching USD 45.54 billion. However, March 2024 witnessed a notable decline of 53.56% in gold imports.

What is the Sovereign Gold Bond Scheme?

The SGB scheme was introduced in November 2015. Its primary objective is to decrease the demand for physical gold and channel domestic savings, otherwise spent on gold, into financial savings.

Eligibility for Purchase: The bonds are available to resident individuals, Hindu Undivided Families (HUFs), trusts, universities, and charitable institutions.

Channels for SGB Purchase

SGBs can be purchased through various authorized channels:

• Scheduled Commercial Banks (excluding Small Finance Banks, Payment Banks, and Regional Rural Banks)
• Stock Holding Corporation of India Limited (SHCIL)
• Clearing Corporation of India Limited (CCIL)
• Designated post offices
• National Stock Exchange of India Limited (NSE) and Bombay Stock Exchange Limited (BSE), either directly or through agents.

Key Features of Sovereign Gold Bonds

The issue price of gold bonds is directly linked to the price of gold of 999 purity (24 carats), as published by the India Bullion and Jewellers Association (IBJA), Mumbai.