Today the State run IDBI Bank raised Rs2,310 crore via green bonds. With this, IDBI has become the first state-owned commercial bank to raise $350 million by selling green bonds. The proceeds will be used for refinancing of clean energy projects assisted by the bank which include wind energy, solar energy etc. But what these Green Bonds really are? Let us understand them in detail.
What are green bonds?
For understanding Green Bonds first of all we should understand what a Bond means, Well Bond is a debt instrument through which a company generates income by selling these instruments to investors for raising capital, in return the debt holders or investor will get a healthy interest on the bonds over a period of time.
Now if the issuer of the debt instrument use the capital raised through issuing the bonds for funding green projects then those debt instruments are called as GREEN BONDS.
Why are green bonds important for India?
India has embarked on an ambitious target of building 175 gigawatt of renewable energy capacity by 2022, from just over 30 gigawatt now. This requires a massive $200 billion in funding.
Merits of Green Bonds
- Increasing prospects in Renewable energy resources.
- Lower interest rates charged on the loans against these bonds.
- Is accepted globally as are issued by multi lateral agencies like World Bank, Govt. agencies etc.