India to Raise Rs 20,000 Crore Through Sovereign Green Bonds in H2 FY25

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The Indian government is set to collect Rs 20,000 crore through Sovereign Green Bonds during the second half of the financial year 2025, according to an official release from the Finance Ministry. This initiative marks a continued effort by the government to support environmentally sustainable projects as part of India’s transition towards a low-carbon economy.

The Ministry’s statement highlighted that the borrowing for the second half of FY25 will be completed through 21 weekly auctions, with the Sovereign Green Bonds issued in four tranches of Rs 5,000 crore each. The first of these bonds, with a 10-year maturity, will be issued between November 25 and 29. A second bond, with a 30-year term, will follow between December 9 and 13.

Additional tranches will include a 10-year bond issued from January 27 to 31, and a 30-year bond coming between February 17 and 21, completing the borrowing plan for this period. These bonds, part of the government’s effort to finance environmentally friendly public sector projects, serve as a significant step in meeting India’s climate goals.

The bonds are designed to support India’s green transition, funding various projects that aim to reduce the nation’s carbon footprint. Public sector initiatives, such as renewable energy projects, waste management solutions, and water conservation schemes, are expected to benefit from this funding.

Flexibility Through Green Shoe Option

In an effort to maximize flexibility and meet potential excess demand, the government has retained the right to exercise a “green shoe” option. This allows it to accept an additional subscription of up to Rs 2,000 crore for each security, depending on market conditions during the auction period.

The ability to tap into further investor interest ensures that the government can raise additional funds while supporting its sustainability goals. This option gives financial institutions and other market participants greater confidence in the government’s ability to raise funds for environmentally sustainable development.

Treasury Bill Borrowing and Liquidity Support

Beyond the green bonds, the central government’s weekly borrowing through Treasury Bills during the third quarter (October to December) of FY25 is expected to total Rs 19,000 crore, over a period of 13 weeks. This is part of the broader borrowing program designed to address the government’s funding needs during the second half of the fiscal year.

Additionally, the Reserve Bank of India (RBI) has set the Ways and Means Advances (WMA) limit for the second half of FY25 at Rs 50,000 crore. This provision is intended to address temporary mismatches in the government’s accounts and ensure liquidity in the short term, allowing for a smoother financial management process.

Borrowing Programme Finalized in Consultation with RBI

The Ministry of Finance confirmed that the central government, in consultation with the Reserve Bank of India, has finalized its borrowing programme for the second half of 2024-25. The program aligns with the government’s strategy to balance market borrowing while maintaining fiscal discipline.

For the entire FY25, the government has set a gross market borrowing target of Rs 14.01 lakh crore. Of this, Rs 6.61 lakh crore, or 47.2%, is expected to be raised during the second half of the financial year through the issuance of dated securities and bonds.