Daily Current Affairs Article 26th January 2021: The cost of issuing green bonds has generally remained higher than other bonds in India, largely due to asymmetric information.
The average coupon rate for green bonds issued since 2015 with maturities between 5 to 10 years have generally remained higher than the corporate and government bonds with similar tenure.
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For the US dollar-denominated green bonds with tenure of more than or equal to 10 years, the coupon rate was, however lower than the corporate bonds.
Most of the green bonds in India are issued by the public sector units or corporates with better financial health.
It is evident from the fact that the private sector issuers of green bonds, on average, reported lower debt-to-assets ratio compared to the non-issuers of green bond.
Green bonds constituted only 0.7 percent of all the bonds issued in India since 2018, and bank lending to the non-conventional energy constituted about 7.9 percent of outstanding bank credit to the power sector, as of March 2020.
High borrowing cost has been perhaps the most important challenge and analysis indicates that it could be due to the asymmetric information
Therefore, developing a better information management system in India may help in reducing maturity mismatches, borrowing costs and lead to efficient resource allocation in this segment.
