Sovereign Green Bonds

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Overview:

Recently, the Chairman of Pension Fund Regulatory and Development Authority (PFRDA) said the regulator is keen on pension funds investing in sovereign green bonds (SGBs).

Why in news?

 

The Government of India is expected to issue sovereign green bonds in the second half of the current financial year as part of the overall market borrowing programme. 

About Sovereign Green Bonds: 

  • These are bonds issued by any sovereign entity, inter-governmental groups or alliances and corporations.
  • Aim: The proceeds of the bonds are utilised for projects classified as environmentally sustainable.
  • These are issued with a longer maturity period.
  • In India, the framework for the sovereign green bond was issued by the government on November 9, 2022.

 

Key Facts about the PFRDA:

  • It is a statutory regulatory body set up under PFRDA Act enacted in 2014.
  • Objective: To promote old age income security by establishing, developing, and regulating pension funds and to protect the interests of subscribers to schemes of pension funds and related matters.
  • Composition: It consists of a Chairperson and not more than six members, of whom at least three shall be Whole-Time Members, to be appointed by the Central Government.
  • Nodal Ministry: Ministry of Finance.
  • Headquarters: New Delhi

Functions:

  • Regulate National Pension System (NPS) and other pension schemes to which PFRDA Act applies.
  • Establish, develop and regulate pension funds.
  • Protect the interest of pension fund subscribers.
  • Register and regulate intermediaries.
  • Laying down norms for management of corpus of pension funds.
  • Establish grievance redressal mechanism for subscribers.
  • Settle disputes among intermediaries and also between intermediaries and subscribers.

 


Q) What are bonds?

Bonds are a type of financial instrument that represents a debt obligation. They are typically issued by governments, municipalities, or corporations to raise capital. When you buy a bond, you are essentially lending money to the issuer in exchange for regular interest payments and the return of the principal amount at the bond's maturity.

 

Source: PFRDA keen on pension funds investing in sovereign green bonds on October-March FY24