India may not issue green bonds this fiscal due to lack of ‘greenium’-source

By Dharamraj Dhutia and Aftab Ahmed

MUMBAI (Reuters) – India may not issue any green bonds this fiscal year as investors are unwilling to pay the premium, or “greenium”, that the government expects over existing federal securities, a senior government official said on Tuesday.

“The government is not very keen to issue green bonds because of a lack of premium for such issuances. It had hoped for over 20 basis points of premium in the first auction,” said the official.

The government may wait until such a “greenium” is available and is, therefore, “unlikely” to issue green bonds this fiscal year, said the official, requesting anonymity as they are not authorised to speak to the media.

The government raised 160 billion rupees ($1.93 billion) via five-year and 10-year green bonds in January and February, its first ever such issuance, with the yield five-six basis points lower than the corresponding government bond yields at the time.

It has not issued such bonds since then as it wants a premium but feedback from market participants — in meetings between the central bank and potential buyers like banks and primary dealers — show their unwillingness for such a move.

“The central bank sought opinion on green bond issuance but they have received unanimous feedback that investors are not ready to absorb it at any premium as there is no additional incentive that makes it different from other government securities,” a senior treasury official at a primary dealership said.

The official asked to be unnamed as they are not authorised to speak to the media.

Even the strong demand expected from foreign investors has not materialised. Moreover, their appetite appears to be fading.

Foreign investors bought only around 7 billion rupees of green bonds in January-February and their holding has since fallen to around 3 billion rupees, Clearing Corp of India data showed.

The bulk of the issuance was subscribed by state-run banks and a large state-run insurance company, and there has been no major liquidity in these papers since then. ($1 = 82.8325 Indian rupees)

(Reporting by Dharamraj Dhutia and Aftab Ahmed; Editing by Savio D’Souza)