Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) now have an opportunity to invest in sovereign green bonds and play a part in promoting positive environmental change in India through the IFSC platform. Sovereign Green Bonds are government-issued bonds specifically introduced for financing projects with positive environmental impacts, such as renewable energy, clean transportation, and sustainable infrastructure development. By allowing NRIs/OCIs to invest in these bonds through the IFSC, the government aims to attract foreign capital towards green initiatives within the country. This is a great opportunity for NRI investors to invest in India.
What are Sovereign Green Bonds?
Sovereign green bonds are debt instruments issued by governments to raise funds for environmentally friendly projects. They have become increasingly popular as governments seek to combat climate change and improve their environmental policies. In India, the Reserve Bank of India (RBI) has issued guidelines for the issuance of sovereign green bonds. The proceeds from these bonds are used to finance projects such as renewable energy, energy efficiency, and pollution control. This is different from normal bonds where the proceeds or the funds can be used to finance the projects as the bond issuer sees fit. There are many benefits of investing in SGB like,
- Purposeful Investment: Sovereign Green Bonds are specifically designed to attract funds for projects that align with environmental and climate goals. This ensures that investors, including NRIs, are making a positive impact on the environment with their financial contributions.
- Fixed Tenure and Returns: Like traditional bonds, Sovereign Green Bonds come with a fixed tenure and offer regular interest payments. NRIs can enjoy the benefits of stable, predictable returns while supporting eco-friendly initiatives.
- Government Backed: These bonds are issued by the government, providing a high level of security for investors. NRIs can have confidence in the reliability of their investment, backed by the sovereign guarantee.
- Eligibility for NRIs: With the recent regulatory changes, NRIs are now permitted to invest in Sovereign Green Bonds, expanding the investor base and allowing a wider section of the global Indian community to participate in sustainable finance.
Also read: NRI Investment in Bonds: The Ultimate Guide 2024
New Government Scheme in Sovereign Green Bonds
Reserve Bank of India (RBI) recently made a decision and allowed NRIs/OCIS operations within IFSC to invest in Sovereign green bonds is a crucial step to strengthen the Indian green initiative. This aims to increase funding options for eco-friendly projects in our country. These bonds are not like the old traditional funds that were for general expenses and initiatives, these funds are only for green causes. These initiatives include investment in renewable energy projects like sustainable infrastructure development, solar energy, wind energy, clean transportation initiatives, etc. SGB has great benefits to offer like:
- Stable returns
- Diversification of investment portfolio
- Satisfaction of contributing to environmental betterment
Here the investors get returns in the form of interest on their investments. These funds are utilized in sustainable development projects.
Also read: RBI Guidelines for NRI Investment in India
What is the difference between Sovereign Green Bonds and Green Bonds?
The major difference between sovereign green bonds and green bonds is that sovereign green bonds can only be issued by the national government while green bonds can be issued by any corporates or bond issuing companies. Since sovereign green bonds are backed by the government, they are safer than other green bonds.
Can NRIs Invest in Sovereign Green Bonds?
Yes, NRIs can now invest in Sovereign Green Bonds since they are included in the Fully Accessible Route (FAR) list. As per the recent announcement by RBI, Sovereign Green Bonds issued during the F.Y. 23-24 will be included in the FAR list and NRIs can invest in it.
Also read: Best Monthly Interest Paying Bonds for NRIs
Can NRIs invest in Sovereign Gold Bonds?
Sovereign Gold Bonds (SGBs) are financial instruments issued by the Reserve Bank of India (RBI) on behalf of the Government of India, allowing individuals to invest in gold without owning physical gold. Sovereign Gold Bond Scheme was launched in November 2015 by the Government of India under the Gold Monetization Scheme. These bonds are denominated in grams of gold and are a secure and convenient way for investors to participate in the gold market.
However, under the regulations of the Foreign Exchange Management Act (FEMA), 1999, Non-Resident Indians (NRIs) are not permitted to invest in Sovereign Gold Bonds. However, an NRI who previously invested in SGBs before attaining NRI status can retain the bonds until their maturity or request early redemption.
Also read: Best NRI Investments in India: Top 10 Investment Options for NRIs/OCIs in India 2024
Start your India Investing Journey as an NRI with SBNRI
NRIs can now download the SBNRI App and choose to invest in different investment options in India with ease. You can also get detailed investment advice from experts at SBNRI. Also, visit our blog and YouTube channel for more details.
SBNRI is an authorized Mutual Fund Distributor platform & registered with the Association of Mutual Funds in India (AMFI). ARN No. 246671. NRIs willing to invest in mutual funds in India can download the SBNRI App to choose from 2,000+ mutual fund schemes or can connect with the SBNRI wealth team to better understand Mutual Fund investments.
FAQs
Are NRIs eligible for SGB?
- Yes, NRIs are eligible to invest in Sovereign Green Bonds. They can invest under IFSC which is International Financial Services Centre. However they cannot invest in Sovereign Gold Bonds.
How can NRI buy bonds in India?
- NRIs can buy bonds using NRO accounts and can invest in Indian bonds. NRIs can invest in Indian bonds through NRE (Non-Residential External) Accounts, with full repatriation of both principal and interest.
What happens after 8 years of sovereign gold bond?
- When Sovereign Gold Bonds (SGBs) mature after eight years, the interest and maturity amount will be credited to the investor’s bank account. Interest payments will occur semi-annually, with the final interest payment and principal repayment made together at maturity.
Can SGB be redeemed as gold?
- SGBs are government securities that are known in grams of gold. They are alternatives for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash after maturity.
Is SGB better than buying gold?
- Sovereign Gold Bonds (SGBs) have a lock-in period of five years, meaning you can’t sell or trade them in the secondary market during this time. In contrast, you can buy or sell physical gold at any bank or jewelry shop whenever you need cash, providing more liquidity.
What bonds are eligible for NRI in India?
- NRIs are allowed to invest in the following bonds:
- PSU and capital bonds
- NCDs (Non-convertible debentures)
- Debt mutual funds
- Bharat bond ETF and EOF
- Sovereign Green Bonds
Can NRI invest in government bonds in India?
- Yes, NRIs can invest in government bonds and securities in India. You can find more details about it here.
