(Bloomberg) -- India made 100 billion rupees ($1.2 billion) of green bonds eligible for potential inclusion in JPMorgan Chase & Co.’s flagship emerging market debt index, suggesting officials are looking to push sustainable capital raising.
Environmentally friendly notes with a 10-year maturity to be issued in the second half of the 2024-2025 fiscal year will be included in the index-eligible fully accessible route category, the central bank said in a statement late on Thursday, without offering a reason. A spokesman for the Reserve Bank of India didn’t respond to a request for comment.
India’s sales of sovereign green debt are running short of the official target this year, in part because there’s been little pricing difference relative to conventional bonds. Financing for sustainable projects should in theory be less expensive.
The government sold just a fraction of the 10-year green notes it had planned to sell in the first half of this fiscal year, and an official told Bloomberg in August that sales would be scrapped if the so-called greenium was inadequate.
The decision also comes just three months after India imposed controls on foreign ownership of some newly issued bonds with 14-year and 30-year tenors. The rationale offered for the limitations at the time was to concentrate demand at the front end of the curve, and that it wasn’t looking to curb hot money inflows.
Still, analysts said the surprise move suggested officials were growing uneasy with the tens of billions of dollars of overseas funds headed for the local market.
“The government has had some issues in the recent past generating demand for green bonds,” said Umesh Tulsyan, managing director at Sovereign Global Markets in New Delhi. “This move works out both ways” as the government will allow foreign investors to buy long-term debt while maintaining sufficient supply for domestic institutions.
While the government imposes limits on foreign ownership in much of its debt market, there are no such restrictions on the roughly three dozen FAR securities.
India joined JPMorgan’s EM bond index in late June, a watershed moment that helped global funds invest in the debt market that’s one of the world’s best performers, but has been difficult to access due to tight regulations.
Local currency bonds eligible for inclusion in US bank’s benchmark must have more than 2.5 years of maturity remaining and $1billion in amount outstanding.
(Bloomberg LP is the parent company of Bloomberg Index Services Ltd., which administers indexes that compete with those from other providers, and Bloomberg News.)
--With assistance from Anup Roy and Finbarr Flynn.
(Updates with quote in fifth paragraph, background throughout.)
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