Green bonds in India

What a green bond actually is

A green bond works exactly like any other bond. You lend money to a government, a company or a city; you receive a fixed (or floating) coupon; you get your face value back on maturity. The only thing that makes it "green" is a use-of-proceeds commitment: the issuer agrees, in a published framework, to spend the money it raises on eligible green projects and to report on where it went.

That distinction matters more than it sounds. The green label attaches to the use of the cash, not to your risk or your return. A sovereign green bond carries the same credit risk as any Government of India security — that is, effectively none. A corporate green bond carries the same credit risk as that company's ordinary bonds. Buying green does not, by itself, make a bond safer or higher-yielding; it just directs your capital toward climate-friendly spending.

Because the label is a promise, it can be abused — "greenwashing", where proceeds drift toward projects that aren't genuinely green. That is why credible green bonds come with an independent second-party opinion on the framework and post-issuance reporting on how the money was used. In India, SEBI's rules for corporate issuers and the government's own sovereign framework both build in these guardrails (covered below).

India's Sovereign Green Bonds (SGrBs)

India's flagship green instrument is the Sovereign Green Bond. The Government of India approved its Sovereign Green Bond Framework in November 2022, and the RBI issued the first SGrBs in January 2023. They are dated central-government securities — identical in mechanics to a normal G-Sec — but the proceeds are earmarked for public green spending. The framework was reviewed by CICERO (an independent climate-research centre), which rated it "Medium Green".

The framework lists nine eligible categories: renewable energy, energy efficiency, clean transportation, climate-change adaptation, sustainable water and waste management, pollution prevention, green buildings, sustainable natural-resource and land use, and biodiversity conservation. It deliberately excludes fossil fuels, nuclear, large hydro above 25 MW, landfill projects, and biomass sourced from protected areas. A Green Finance Working Committee under the Ministry of Finance selects the projects, and eligible spending is capped to expenditure incurred no more than 12 months before issuance.

Issuance has grown year on year but stayed modest relative to the government's total borrowing. FY23 (the debut) raised ₹16,000 crore and FY24 raised ₹20,000 crore. For FY25, the ₹20,000 crore figure often quoted was the H2-FY25 scheduled amount; actual FY25 issuance came to about ₹21,697 crore (per the government's Expenditure Profile, Statement 15A). That takes cumulative sovereign green issuance to ₹56,000 crore-plus by mid-2025 — roughly ₹57,700 crore through the end of FY25. For FY26, the borrowing calendar scheduled about ₹10,000 crore in each half-year. The table below lists the main tranches; confirm exact ISIN-level coupons and amounts against RBI auction results before acting.

Current SGrB yields and the "greenium" reality

Because an SGrB is a G-Sec, its yield tracks the ordinary government yield curve. The benchmark 10-year G-Sec yield was 6.77% on 8 July 2026 (it moves every trading day), and SGrBs of similar maturity price around the same level. The 30-year 6.98% SGrB 2054 — first sold in FY25 and last successfully reissued on 21 February 2025 (an earlier reissue ran on 13 December 2024) — gives you a sense of the long end. So the realistic answer to "what do green bonds pay in India?" is: roughly whatever a normal G-Sec of the same tenure pays — about 6.7–7% at the time of writing.

In theory, investors sometimes accept a slightly lower yield for green bonds — the "greenium" — because they value the environmental use of proceeds. India's greenium has been tiny and shrinking. The 2023 debut squeezed out about 5–6 basis points; since then it has been closer to 0–3 bps, and often nil. In November 2023 the 5-year SGrB priced at 7.25% when the 5-year G-Sec was at 7.27% — a greenium of about 2 bps. Globally the premium has been fading too.

The market has, if anything, gone the other way: investors have at times demanded higher yields for SGrBs, not lower. Roughly ₹7,440 crore of green bonds devolved to primary dealers across two FY2024-25 auctions — the 29 November 2024 and 31 January 2025 tranches — as bidders sought higher yields (FY2023-24, by contrast, saw the full ₹20,000 crore placed with zero devolvement); the RBI cancelled a 10-year green auction in May 2024; and on 13 June 2025 it cancelled the 30-year 6.98% SGrB 2054 reissue auction even though bids were about 2.2 times the ₹5,000 crore on offer (90 competitive bids worth ₹10,943.5 crore, all rejected), because the yields participants wanted exceeded the RBI's cut-off. Secondary-market liquidity is also thin — banks tend to park SGrBs in their held-to-maturity books and rarely trade them.

How a retail investor can buy SGrBs

Because SGrBs are dated central-government securities, you buy them through exactly the same routes as any other G-Sec — there is no separate "green bond" product counter for retail.

The three practical routes are the RBI Retail Direct portal, the stock exchange, and non-competitive bidding at primary auctions. Each works a little differently, and not every SGrB tranche has been retail-accessible, so check availability for the specific security you want.

• RBI Retail Direct (rbiretaildirect.org.in): open a free Retail Direct Gilt (RDG) account with PAN, Aadhaar, bank account and a savings/current account. You can place non-competitive bids in primary auctions of central-government securities (which include SGrBs) from ₹10,000 up to ₹2 crore per auction, with no yield to quote, and hold and sell in the secondary segment. Confirm on the live portal that the particular SGrB auction is open to retail non-competitive bidding.
• Stock exchange / demat: SGrBs are listed and can be bought and sold on the NSE/BSE debt segment through your regular broker and demat account, like any listed G-Sec. Be prepared for thin volumes and wider bid-ask spreads — secondary liquidity in SGrBs is limited.
• Bond platforms and banks: SEBI-registered online bond platforms and some banks also facilitate G-Sec purchases; they may or may not carry SGrBs specifically. See our guide on how to invest in bonds for the mechanics and our list of SEBI-registered platforms.
• Minimums and settlement mirror ordinary G-Secs: ₹10,000 face value and multiples on Retail Direct; holdings sit in your RDG or demat account and settle like other government securities.

Corporate and municipal green bonds, and SEBI's framework

Beyond the sovereign, Indian companies, PSUs and cities also issue green debt. The private sector has actually driven most of India's green bond volume — the total Indian green bond market crossed roughly US$21 billion by early 2023, with private issuers accounting for around 84%. Big names include Greenko (the largest issuer), ReNew, Adani Green, NTPC, IREDA, PFC, REC and SBI. The catch for retail: a large share of these are dollar-denominated bonds sold offshore to institutions, or private placements — most are not readily available to an ordinary Indian retail investor. Municipal green bonds are the main exception where retail has been let in.

Corporate and municipal green bonds are governed by SEBI's framework for Green Debt Securities (GDS), first introduced in 2017 and substantially revised in February 2023. The revised rules align India with the ICMA Green Bond Principles, require an independent third-party review/certification of the bond, mandate disclosures tied to Business Responsibility and Sustainability Reporting (BRSR), and add anti-greenwashing "dos and don'ts". SEBI also recognised sub-categories such as blue bonds (water/marine), yellow bonds (solar) and transition bonds, and in June 2025 extended the regime to social, sustainability and sustainability-linked debt. SEBI publishes green-debt issuance statistics on its site.

The examples below are illustrative of the corporate/municipal market — not live buy recommendations. Coupons and terms are historical; verify any current issue's documents before investing.

The honest take: return ≈ a normal G-Sec

Strip away the label and the numbers are plain. An SGrB carries the same sovereign credit as a regular G-Sec, yields about the same (~6.7–7%), is taxed the same, and is often less liquid. The greenium that would reward you for going green has been 0–3 basis points at best — a rounding error on your return. So you should not buy a sovereign green bond expecting to earn more; if anything, expect a fraction less yield and thinner trading.

Tax is identical to any government bond and there is no special green exemption. The coupon is taxed at your income-tax slab as "income from other sources". If you sell in the secondary market before maturity, listed-bond capital-gains rules apply (long-term gains after 12 months at 12.5%, short-term at your slab); held to maturity there is no capital gain because you are repaid at face value. Confirm the current rates and any TDS with your tax adviser — see our government bonds guide for the full G-Sec tax picture.

So who should buy them? Investors for whom the use of proceeds genuinely matters — you want your rupees explicitly directed to India's renewable-energy and climate spending, and you are content to earn the same as a normal G-Sec to get that. If your goal is purely the best safe fixed-income return, a plain G-Sec, the RBI Floating Rate Savings Bond (8.05% for Jul–Dec 2026) or a debt fund may serve you better on yield or liquidity. Green bonds are a values-and-impact choice layered on top of a standard government return — not a higher-yield play.