Daily Current Affairs : 27-September-2023
In a significant stride towards sustainable development, the National Bank for Agriculture and Rural Development (NABARD) has introduced India’s inaugural ‘AAA’ rated Indian Rupee denominated Social Bonds. This initiative reflects a crucial step towards financing projects with a focus on energy efficiency, green infrastructure, and social welfare. Let’s delve deeper into this groundbreaking development.
NABARD’s Sustainability Bond Framework
Underlining NABARD’s commitment to fostering sustainable initiatives, the institution has unveiled a Sustainability Bond Framework. This framework aims to fund and refinance projects dedicated to energy efficiency. These encompass a wide array of domains such as green buildings, energy storage solutions, and smart grids. This strategic move showcases NABARD’s dedication to catalyzing environmentally conscious projects.
Key Features of the Social Bonds
The AAA-rated INR Social Bonds mark a watershed moment for India’s financial landscape. Here are the essential features:
- Issuance and Listing: NABARD has privately issued these bonds to eligible institutional investors. Come September 29, 2023, these bonds will be officially listed on the Bombay Stock Exchange (BSE), signifying their integration into the mainstream financial market.
- Lock-in Period and Coupon Payments: Holders of these bonds are required to maintain them for a stipulated period of five years. During this period, coupon payments will be made annually, ensuring a steady flow of returns for the investors.
- Face Value: Each bond has a face value of ₹1 lakh, making them accessible to a diverse range of investors.
- Highest Credit Rating: Notably, these bonds have garnered the prestigious AAA rating from CRISIL Ltd and ICRA Ltd, signifying their exceptional creditworthiness and stability.
Understanding Social Bonds
Social Bonds, as financial instruments, play a pivotal role in driving positive societal change. These bonds are specifically designed to raise funds for projects addressing critical social issues. These encompass sectors such as healthcare, education, affordable housing, poverty alleviation, and environmental sustainability. By channeling investments into these sectors, Social Bonds pave the way for a better quality of life for marginalized communities and contribute significantly to societal well-being.
Historical Perspective: India’s First Social Impact Bond
India’s journey into the realm of Social Bonds commenced in 2020 when the Pimpri Chinchwad Municipal Corporation (PCMC) in Maharashtra’s Pune, in collaboration with the United Nations Development Programme (UNDP), co-created the nation’s maiden Social Impact Bond (SIB). This pioneering initiative laid the foundation for subsequent endeavors, including NABARD’s AAA-rated Social Bonds.
Important Points:
- NABARD’s Achievement:
- Introduced India’s inaugural ‘AAA’ rated Indian Rupee denominated Social Bonds.
- Represents a significant step towards financing energy efficiency, green infrastructure, and social welfare projects.
- Sustainability Bond Framework:
- Launched by NABARD to fund and refinance projects focused on energy efficiency.
- Covers areas such as green buildings, energy storage, and smart grids.
- Key Features of Social Bonds:
- Privately issued to eligible institutional investors by NABARD.
- Listed on the Bombay Stock Exchange (BSE) starting from September 29, 2023.
- Investors required to hold bonds for a period of five years.
- Annual coupon payments ensure consistent returns.
- Each bond has a face value of ₹1 lakh.
- Received the highest AAA rating from CRISIL Ltd and ICRA Ltd, indicating exceptional creditworthiness and stability.
- Purpose of Social Bonds:
- Designed to raise funds for projects addressing critical social issues.
- Targets sectors like healthcare, education, affordable housing, poverty alleviation, and environmental sustainability.
- Channeling investments into these areas for societal betterment.
- Historical Perspective:
- India’s venture into Social Bonds began with the creation of the Social Impact Bond (SIB) by PCMC and UNDP in 2020.
- This pioneering initiative laid the foundation for subsequent endeavors, including NABARD’s AAA-rated Social Bonds.
- Significance and Impact:
- NABARD’s initiative signifies India’s commitment to inclusive growth and responsible investing.
- The bonds are set to make a substantial impact on vital projects, contributing significantly to India’s progress and citizens’ well-being.
Why In News
The National Bank for Agriculture and Rural Development (NABARD) made history by issuing India’s first ‘AAA’ rated Indian Rupee denominated Social Bonds, reinforcing its commitment to sustainable development. These bonds, backed by NABARD’s impeccable credit rating, will channel funds towards crucial rural and agricultural projects, fostering economic growth and empowering local communities across the country.
MCQs about NABARD’s AAA-Rated Social Bonds
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What is the primary purpose of NABARD’s AAA-rated Social Bonds?
A. To finance energy efficiency projects
B. To support artistic endeavors
C. To promote space exploration
D. To fund luxury lifestyle projects
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When will NABARD’s Social Bonds be officially listed in the market?
A. October 29, 2023
B. September 29, 2023
C. November 29, 2023
D. August 29, 2023
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What sectors do Social Bonds typically target for funding?
A. Agriculture and Farming
B. Healthcare, education, affordable housing, and environmental sustainability
C. Technology and Gadgets
D. Luxury Fashion and Lifestyle
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What was India’s first venture into Social Bonds?
A. NABARD’s AAA-Rated Social Bonds
B. United Nations Development Programme’s (UNDP) Bonds
C. Social Impact Bond (SIB) created by PCMC and UNDP in 2020
D. Pimpri Chinchwad Municipal Corporation’s (PCMC) Green Bonds
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