 "green bonds")
The Reserve Bank of India’s (RBI’s) plan to raise ₹10,000 crore through 30-year green bonds only in the first half of 2025-26 (FY26) is expected to be met with strong demand from insurance companies and pension funds, said dealers.
The amount will be raised in two tranches of ₹5,000 crore each. The government has allocated ₹48,000 crore for Sovereign Green Bonds in FY26.
In FY25, banks were reluctant to buy 10-year green bonds as the government sought to sell the bonds at a premium, according to dealers.
On May 31, 2024, an auction of ₹6,000 crore was entirely cancelled. On August 2, 2024, a similar auction of ₹6,000 crore was partially cancelled, with ₹1,697 crore accepted. On November 29, 2024, auction worth ₹5,000 crore was partially devolved, with ₹1,502 crore accepted and ₹3,497 crore devolved on primary dealers. Similarly, the January 31, 2025 auction of ₹5,000 crore also faced partial devolvement, with ₹3,945 crore devolved and only ₹1,054 crore accepted.
On the other hand, the RBI auctioned 30-year green bonds in two tranches of ₹5,000 crore each, which met with good demand from investors.
“The RBI saw the response for 10-year green bonds and decided to stick with 30-year bonds, which were fully sold,” said a dealer at a primary dealership. “The banks were not ready to pay greenium, but 30-year green bond, which is of longer tenure, had fairly good demand,” he added.
"Greenium" refers to the premium investors are willing to pay for green bonds due to their sustainability impact.
Meanwhile, over the past two financial years, the borrowing skew towards the first half of the financial year has decreased from above 60 per cent to 54 per cent.
The government plans to borrow ₹8 trillion through the issuance of government securities in the first half of FY26.
“Over the last two years, the skewness in borrowing towards H1 has declined from the highs of over 60 per cent, possibly reflecting better synced/balanced government revenue stream between H1 and H2 of the financial year. Highest net supply will be felt in April and August, while June will be the lowest,” said Madhavi Arora, lead economist, Emkay Global Financial Services.
Experts said that in the near term, the yield on shorter tenure securities may fall more than the longer ones on the back of heavy supply of longer-term bonds, including ultra-long maturities. Liquidity situation, which is expected to be more comfortable in the first quarter of the upcoming financial year, would support the shorter end.
