What changed
RBI has designated all Sovereign Green Bonds issued by the Government in FY 2023-24 as 'specified securities' under the Fully Accessible Route (FAR). Previously, FAR covered certain specified categories of Central Government securities; now Sovereign Green Bonds are explicitly added. This change is effective immediately from November 8, 2023.
What it means for you
For banks and market participants, this broadens the pool of government securities available for non-resident investment without any limits, potentially increasing demand and liquidity for Sovereign Green Bonds. It aligns with India's green finance goals and may improve pricing for these instruments. Lenders should update their FAR-eligible securities list and inform foreign investor clients.
What you must do
- Update your internal systems to include all Sovereign Green Bonds issued in FY 2023-24 as FAR-eligible securities.
- Communicate this change to your non-resident investor clients and treasury teams handling government securities.
- Review your current holdings of Sovereign Green Bonds to ensure compliance with FAR reporting requirements.
- Monitor market demand and pricing impacts from increased non-resident participation in these bonds.
Who it affects
All participants in the Government Securities market, Non-resident investors in Indian government securities, Banks and primary dealers dealing in Sovereign Green Bonds, Treasury departments of financial institutions
What is the Fully Accessible Route (FAR)?
FAR is a route introduced by RBI in March 2020 that allows non-resident investors to invest in specified Central Government securities without any restrictions, such as investment limits or lock-in periods. These securities are also available to domestic investors.
Which Sovereign Green Bonds are now included under FAR?
All Sovereign Green Bonds issued by the Government in the fiscal year 2023-24 are now designated as 'specified securities' under FAR. This includes bonds issued as per the calendar notified in September 2023.
When does this change take effect?
The directions are applicable with immediate effect from November 8, 2023, the date of the circular.