What changed
RBI notified the 'Scheme for Trading and Settlement of Sovereign Green Bonds in the International Financial Services Centre in India' on August 29, 2024, effective immediately. This scheme enables eligible investors in IFSC to trade and settle SGrBs, backed by amendments to FEMA (Debt Instruments) Regulations, 2019 via a third amendment notified on August 2, 2024.
What it means for you
Banks and lenders operating in IFSC can now facilitate foreign investment in sovereign green bonds, expanding their product suite and attracting ESG-focused capital. The back-to-back arrangement allows IBUs to offset transactions with parent banks in India, managing risk efficiently. This aligns with RBI's developmental policy to deepen green finance markets and enhance IFSC's global competitiveness.
What you must do
- Review the scheme details and ensure your IFSC Banking Unit (IBU) is eligible to participate.
- Coordinate with IFSCA for operational guidelines and authorization as an authorized depository or clearing corporation if applicable.
- Update internal compliance frameworks to handle back-to-back arrangements and FATF high-risk jurisdiction checks.
- Train staff on the new SGrB trading and settlement processes within IFSC.
Who it affects
IFSC Banking Units (IBUs) of Indian and foreign banks, Eligible foreign investors in IFSC, Authorized depositories and clearing corporations in IFSC, Parent banks of IBUs in India
What is the effective date of this scheme?
The scheme came into force with immediate effect from August 29, 2024, as per the RBI notification.
Who can participate in this scheme?
Eligible investors in the IFSC, including those using IFSC Banking Units, can invest in Sovereign Green Bonds. Operational guidelines will be issued by IFSCA.
What is a back-to-back arrangement under this scheme?
It allows an IBU to undertake a transaction with an eligible investor and then enter an offsetting transaction with its parent bank in India (for Indian bank IBUs) or with the branch/subsidiary in India (for foreign bank IBUs).