Creating an Enabling Framework for ESG Bonds in India: RBI Insights

A senior RBI official emphasizes the need for an 'enabling framework' to facilitate the issuance of ESG bonds in India. RBI's Chief General Manager, Dimple Bhandia, pointed to the slow progress in the domestic repo market for corporate bonds and highlighted higher growth rates in corporate bond issuances over the last decade.

A senior official from the Reserve Bank of India (RBI) called for the creation of an 'enabling framework' to aid Indian companies in issuing environmental, social, and governance (ESG) bonds domestically. This call to action was reiterated by Dimple Bhandia, the Chief General Manager of the RBI, during an event organized by industry association Assocham.

Despite the capital market regulator Sebi's substantial regulatory efforts, Bhandia expressed concern over the unsatisfactory development in the repo market for corporate bonds. She noted that many Indian companies are opting to issue ESG bonds overseas due to the current market conditions.

Although the credit derivatives market has seen limited trading, the secondary market activity in corporate bonds is better than perceived. Bhandia also highlighted the increasing foreign portfolio investment in corporate bonds, driven by the Voluntary Retention Route, and the success of allowing banks to hold corporate bonds under the held-to-maturity category.