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If you have monitored Government of India bond auctions over the last couple of years, you have probably seen a new line item appearing on the RBI’s borrowing calendar, namely the Sovereign Green Bonds, or SGrBs. These bonds have moved from being niche Environmental, Social, and Governance (ESG) bonds to being a significant, multi-thousand-crore rupee part of the government’s funding towards climate commitments.
From a fixed-income perspective, this poses an important question: Are these bonds just a marketing rebrand of G-Secs, or are there actual differences in terms of risk, return, and structural framework? This article helps you understand the recent SGrBs, the yields, and the mechanics of these bonds to help you decide on their allocation in your portfolio.
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What Are Sovereign Green Bonds?
Sovereign Green Bonds are government securities issued specifically for financing projects that have environmental benefits, such as construction of solar or wind capacities, electrified railways, metro systems, or even forestation. From a structural perspective, these bonds are completely identical to other Government of India-dated securities: they are issued through the same auction process, enjoy the same sovereign guarantee, and are issued by the RBI on behalf of the Ministry of Finance.
The only distinction is that the proceeds of such securities are directed towards projects that are included in the government’s Green Bond Framework, which was released in November 2022.
Approximately 50% of the SGrBs funds raised so far have been allocated to finance the purchase of energy-efficient electric locomotives, with the remaining funds being allocated to metro projects, the Green Hydrogen mission, renewable energy, and initiatives related to the conservation of forest areas.
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Latest Issuances: Where Things Stand in 2026
India’s SGrB programme has grown steadily since its January 2023 debut. Here’s a quick timeline of how it’s evolved:
| Period | Development |
| Jan 2023 | Maiden auction—₹8,000 crore across 5-year and 10-year bonds, part of a ₹16,000 crore FY23 programme |
| Jan 2024–May 2025 | The government raises ₹44,000 crore through SGrBs in this window alone—more than financial institutions, corporates, and municipal green bond issuers combined |
| FY24–FY25 | Several 10-year SGrB auctions face partial devolvement as investors demand higher yields than the government is willing to pay |
| FY26 | Government budgets ₹48,000 crore for SGBRs; RBI shifts focus to 30-year paper after weak demand for 10-year bonds |
| June 2025 | RBI calls off a 30-year SGrB auction (6.98% coupon, 2054 maturity) despite bids worth over double the ₹5,000 crore on offer, as the yields the market demanded exceeded the RBI’s comfort level |
| H1 FY27 (Apr–Sep 2026) | ₹15,000 crore of SGrBs planned, part of the government’s overall ₹8.2 lakh crore H1 borrowing programme |
Sources: Business Standard, Institute for Energy Economics and Financial Analysis
There are a few things to note here. First, the total outstanding stock still accounts for a small fraction of India’s overall G-Sec market, placing SGrBs on the fringe as an alternative or niche product. Second, demand for SGrBs hasn’t been strong. The RBI had to cancel some auctions or transfer the auction responsibility to the market after some bidders attempted to push the yields the government was not ready to accept.
There are valid reasons to doubt that “green” sells “easily.” Note that the numbers related to FY26 and H1 FY27 are budgeted or planned values. Actual issuance is likely to be lower than budgeted values due to cancelled or transferred auctions.
Returns: How Do SGrB Yields Compare to Regular G-Secs?
This is the section that most finance-savvy readers will find interesting. In theory, green bonds would have a lower yield than peer conventional bonds, and the market would be willing to accept a lower return because of the sustainability label; this is the “greenium.” In practice, India’s greenium has been small and has been shrinking over time.
- On the first auction for SGrBs in January 2023, the Reserve Bank of India (RBI) assigned coupons for the five-year and ten-year SGrBs at a discount of around 5 to 6 basis points [1] on comparable government securities, resulting in some savings on a cost-to-cost basis for the government.
- Since then, the gap has decreased further; India’s greenium hovers in the range of 2 to 3 basis points, well below the global average of 7 to 8 basis points.
- In June 2025, the gap effectively vanished for a stretch: the RBI called off a 30-year SGrB auction (which carried a pre-set coupon of 6.98%) because investors were demanding yields the government considered too high, a sign that the greenium can disappear entirely during volatile market conditions.
- Since 2023, coupons along the SGrB curve have been between 6.98% and 8.40%, depending on the tenure and the prevailing market conditions.
What this means is that one should not buy SGrBs thinking they will give better after-tax returns than comparable G-Secs. The main reason to buy them is to direct your fixed income investment to a specific climate-related project with virtually zero default risk, which is the same as investing in any other government security.
How to Invest in Sovereign Green Bonds
SGBs can surprise you by how approachable they are, even more so now with retail participation permitted.
- RBI Retail Direct: Potential investors have the opportunity to place bids in primary auctions through the RBI Retail Direct Platform. Each auction has a 5% quota solely reserved for non-competitive or retail bids.
- Stock Exchanges: Once issued, SGrBs become listed on stock exchanges. Investors can sell or buy the security in the secondary markets like conventional G-Secs, though liquidity is thin.
- Brokers and bond platforms: Several SEBI-registered bond platforms and brokerages have begun providing government securities, including SGrBs, for investors who would like to avoid the complexities of auctions.
- Mutual funds/gilt funds: Some gilt or dynamic bond funds hold SGrBs, providing investors with an indirect exposure to SGrBs without the requirement to pick individual securities.
Interest on SGrBs is paid semi-annually and is taxed as per your income tax slab, just like other government securities. There is no individual tax benefit for the “green” label.
The Honest Trade-Offs
There are a few friction points in India’s SGrB market that make transparency more important than ever. Large secondary market buyers, including insurers, pension funds, and PSU banks, buy and hold to maturity rather than trade, which results in limited market liquidity. The greenium is too small to affect auction prices, resulting in auction cancellations when the market fails to play along. Also, unlike some green bond markets around the world, India does not mandate independent third-party monitoring of the use of proceeds, which may be relevant if you want to make an impact investment.
That said, none of this should discourage you from investing in SGrBs. Credit risk is the same as buying government securities. Given the constraints, you should view SGrBs as a good opportunity to own government securities in your investment portfolio rather than a separate asset class.
Sovereign Green Bonds in India Frequently Asked Questions
Yes—SGrBs carry sovereign credit risk, meaning the same near-zero default risk as any Government of India security, unlike corporate green bonds, which carry issuer-specific credit risk.
Generally no. India’s “greenium” is thin (roughly 2-3 basis points recently), so yields are close to, sometimes even higher than, comparable conventional G-Secs.
Yes, through the RBI Retail Direct platform for primary auctions, or via stock exchanges and bond platforms in the secondary market.
No. Interest is taxable at your applicable income tax slab, exactly like any other government security.
India has issued SGrBs across 5-year, 10-year, and 30-year maturities since 2023, with recent auctions concentrated in the 30-year segment.
Sources
Disclaimer
Fixed returns do not constitute guaranteed or assured returns. Investments in corporate debt securities and municipal debt securities/securitized debt instruments are subject to credit risks, market risks, and default risks, including delay and/or default in payment. Read all the offer-related documents carefully. This blog/article should not be construed as financial advice or as an offer or recommendation to buy or sell any security or any products/services of/on GoldenPi or any product/services of its third-party client(s). For a detailed calculation of YTM, visit our website. T&C’s Apply.
