India's insurance regulator to treat green bond purchases as infra investments

The Insurance Regulatory and Development Authority of India has said insurers will be allowed to classify their sovereign green bond purchases as infrastructure investments.

The regulator, in a circular dated Jan. 13, said the move was made with the objective of “de-concentration and diversification” of insurers’ infrastructure portfolios as well as “from the perspective of participation in environmental, social and governance (ESG) initiatives.”

Insurance firms had asked for clarification on how they could classify investments made in these green bonds, which are being issued for the first time.

India aims to raise 160 billion rupees ($1.96 billion) through the issue of its first-ever sovereign green bonds this financial year. The Reserve Bank of India will auction 5- and 10-year green bonds worth 40 billion rupees each on Jan. 25 and on Feb. 9.

The investments in green bonds can qualify towards statutory liquidity ratio (SLR) – the minimum percentage of deposits commercial banks are required to invest in liquid assets, such as government bonds.

Finance Minister Nirmala Sitharaman announced the plan to issue sovereign green bonds in the 2022-23 budget as Asia’s third-largest economy attempts to tap the domestic debt market to finance green infrastructure projects.

($1 = 81.5600 Indian rupees)

by Nataly Kramer