Oct 30, 2024Scheme for Trading and Settlement of SGBs in IFSC
The Statement on Developmental and Regulatory Policies issued by the RBI as a part of its Bi-monthly policy statement for 2024-25 dated April 5, 2024, referred to a scheme for investment and trading in sovereign green bonds (‘SGBs’) by eligible foreign investors in IFSCs in India (‘Scheme’). The Scheme, issued on August 29, 2024, and which has come into force with immediate effect, identifies, inter alia, the following key terms:
i. Eligible Investors:
a. persons resident outside India as defined in Section 2(w) of Foreign Exchange Management Act, 1999 (‘FEMA’), who are eligible to invest in IFSC, as specified in the International Financial Services Centres Authority (‘IFSCA’) and are not part of high-risk jurisdictions as identified by the Financial Action Task Force (‘FATF’);
b. any IFSC banking unit (‘IBU’) of a foreign bank which does not have a branch or subsidiary licensed to undertake banking business in India subject to further terms set out under the Scheme; and
c. persons resident outside India as stated under the Foreign Exchange Management (International Financial Services Centre) Regulations, 2015, that are eligible to invest in IFSC, as specified by the IFSCA and are not part of high-risk jurisdictions as identified by the FATF, subject to further terms set out under the Scheme.
ii. Eligible Securities and Participation: The nature of the SGBs eligible for investment under the Scheme will be governed by the Circulars identified in the Scheme subject to such SGBs being designated as ‘specified securities’ or not. Further, the eligible investors may participate in primary auctions (by the RBI) or transact in secondary markets in IFSCs.
iii. Other Terms: The Scheme also provides for other key details such as: (a) pre-requisites to operationalisation of the Scheme; (b) terms of participation in the primary market; (c) terms of participation in the secondary market (including details on nature of eligible transactions, trading procedures, settlement process); (d) coupon payment and redemption; (e) guidelines for KYC/anti money laundering; (f) data management; and (g) reporting requirements.