Green bonds are debt instruments that raise money for eligible environmental projects, with India recording about ₹72,697 crore of Sovereign Green Bond issuance from FY2022-23 through FY2025-26.
India's green bond market is no longer a small part of climate finance. Since the Centre entered the market in FY2022-23, the Government of India has raised about ₹72,697 crore through Sovereign Green Bonds in four financial years, including ₹16,000 crore in FY2022-23, ₹20,000 crore in FY2023-24, ₹21,697 crore in FY2024-25 and ₹15,000 crore in FY2025-26. For the first half of FY2026-27, the government scheduled another ₹15,000 crore, split across three ₹5,000 crore tranches. If completed as planned, this would take cumulative sovereign green bond mobilisation since FY2022-23 to about ₹87,697 crore. (Economic Survey 2025-26)
The money is tied to identified public spending. The Union Budget 2026-27 lists ₹30,941.30 crore of proposed expenditure eligible for financing under the Sovereign Green Bond framework in FY2026-27. This includes ₹15,000 crore for railway-related expenditure, ₹10,000 crore for PM Surya Ghar, ₹4,068.80 crore for metro projects and funding for solar power, wind energy, PM-KUSUM, the National Green Hydrogen Mission and the Green India Mission. In FY2024-25 alone, actual eligible green expenditure reached ₹30,274.47 crore, compared with ₹21,697.40 crore raised through Sovereign Green Bonds. The remaining ₹8,577.07 crore came from general government revenue.
The market is also spreading beyond central government borrowing. SEBI's ESG Debt Securities database recorded ₹21,678.59 crore of cumulative listed ESG debt issuance as of June 30, 2026. The dataset includes a ₹10,000 crore green bond issued by Bank of Baroda in March 2026, along with issues from renewable-energy companies, financial institutions and municipal corporations.
What Are Green Bonds?
A green bond works much like a regular bond. A government, company, bank or municipal body borrows money from investors and agrees to pay interest and repay the principal according to the terms of the bond. The difference is what the borrowed money can be used for.
Money raised through a green bond is earmarked for eligible projects with environmental outcomes. In India, these can include renewable energy, electric public transport, energy efficiency, climate adaptation, water treatment, pollution control, green buildings, biodiversity protection and some forms of sustainable land management.
The word "green" does not mean the investment is risk-free. Investors still need to look at the issuer, maturity, interest rate, liquidity and repayment capacity. A corporate green bond carries the credit risk of the company that issued it. A Sovereign Green Bond carries the credit profile of the Government of India.
India now has three visible parts of the market: government Sovereign Green Bonds, corporate and financial-sector green debt, and municipal green bonds. Rules have also expanded into other forms of environmental and social debt.
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How Does a Green Bond Work?
Consider a city that needs ₹200 crore for a sewage treatment system.
Instead of relying only on budget funds or a bank loan, the municipal body can issue a bond. Investors provide the money. The issuer pays interest according to the bond terms and repays the principal on maturity.
If that debt is issued as a green bond, the issuer must identify the environmental purpose for which the funds will be used and follow the applicable disclosure and reporting rules.
The basic flow is:
Issuer raises money → proceeds are allocated to eligible green expenditure → projects are tracked → allocation and impact information is reported → interest and principal are paid according to bond terms.
The repayment is not automatically dependent on the environmental project earning money. In many green bonds, repayment is backed by the issuer in the same way as its other debt.
What can qualify as green in India?
India's Sovereign Green Bond Framework identifies areas including:
- Renewable energy
- Energy efficiency
- Clean transportation
- Climate change adaptation
- Sustainable water and waste management
- Pollution prevention and control
- Green buildings
- Sustainable management of natural resources and land
- Biodiversity conservation
The framework also places exclusions on activities such as fossil-fuel extraction and production, nuclear power, direct waste incineration, landfill projects and large hydropower projects above the framework's specified threshold.
The government framework can be read here: India's Sovereign Green Bond Framework, Department of Economic Affairs
What Is a Sovereign Green Bond?
A Sovereign Green Bond, or SGrB, is a green bond issued by the central government.
India announced its Sovereign Green Bond programme in the Union Budget 2022-23 and published its Sovereign Green Bond Framework in November 2022.
The Government of India uses the proceeds for eligible expenditure identified under the framework. The debt itself forms part of government borrowing.
The framework also established a Green Finance Working Committee to help evaluate and select eligible expenditure. The framework received a second-party opinion from CICERO, which assigned it a "Medium Green" rating and assessed the governance framework as "Good."
India's first Sovereign Green Bond auction took place in January 2023.
RBI auction data show that the first ₹8,000 crore offering was split between two securities of ₹4,000 crore each. Competitive bids received were ₹13,525 crore for one security and ₹19,367 crore for the other. The weighted cut-off yields were around 7.10 per cent and 7.29 per cent.
Green Bonds in India: Key Numbers
The clearest official series comes from the Economic Survey 2025-26.
| Financial year | Sovereign Green Bond issuance |
|---|---|
| FY2022-23 | ₹16,000 crore |
| FY2023-24 | ₹20,000 crore |
| FY2024-25 | ₹21,697 crore |
| FY2025-26 | ₹15,000 crore |
| Cumulative through FY2025-26 | ₹72,697 crore |
The Department of Economic Affairs' annual reporting gives the FY2024-25 amount at ₹21,697.40 crore, taking the cumulative total to about ₹72,697.40 crore when the four years are added.
This sovereign figure should not be added blindly to every other number described as "India's green bond market." Corporate bonds listed in India, municipal bonds, overseas green bonds by Indian companies and government Sovereign Green Bonds come from different datasets.
What Changed in India's Green Bond Market in 2026?
India's green bond market entered 2026 with changes in issuance, reporting and regulation.
1. The government planned another ₹15,000 crore of Sovereign Green Bonds
The Government of India's borrowing plan for the first half of FY2026-27 included ₹15,000 crore of Sovereign Green Bonds within gross market borrowing of ₹8.20 lakh crore.
The schedule also provides a 5 per cent reservation in government-security auctions for eligible individuals and institutions bidding under the non-competitive route.
The green security used in the 2026 programme is a long-dated government bond carrying a 7.50 per cent coupon and maturing on April 27, 2056.
If the full ₹15,000 crore scheduled for H1 is completed, cumulative Sovereign Green Bond issuance since FY2022-23 would rise from about ₹72,697 crore to roughly ₹87,697 crore.
2. SEBI changed independent-review requirements
On February 27, 2026, SEBI issued revised requirements dealing with independent third-party reviewers and certifiers for green debt securities.
The change brings the review framework closer to the requirements being applied to the wider ESG debt market and places focus on independence, conflict management and verification of compliance.
For issuers, this means the environmental label is supported by a review process rather than relying only on the issuer's statement.
For investors, it provides another layer of information when checking whether the bond follows the stated framework.
3. India published its first Sovereign Green Bond impact report
The Department of Economic Affairs published the Sovereign Green Bonds Impact Report 2022-23 on February 19, 2026.
This is an important change in the reporting cycle. Allocation reporting tells investors where the money went. Impact reporting is intended to explain what environmental results were associated with the financed expenditure.
The timing is also relevant. India's framework had committed to post-issuance reporting, and the Economic Survey later identified delayed impact reporting as one factor limiting the pricing benefit of Indian Sovereign Green Bonds.
What Does the Union Budget Data Say About Green Bond?
The Union Budget 2026-27 provides one of the most useful official datasets for understanding green expenditure linked with Sovereign Green Bonds.
Statement 15A of the Expenditure Profile records ₹30,274.47 crore of eligible green expenditure in FY2024-25.
The same statement says the government raised ₹21,697.40 crore through Sovereign Green Bonds in FY2024-25.
The difference, ₹8,577.07 crore, was met through general government revenues rather than green-bond proceeds.
This means Sovereign Green Bond proceeds covered about 71.7 per cent of the eligible green expenditure recorded for that year.
FY2024-25 actual green expenditure included:
| Area | FY2024-25 actual expenditure |
|---|---|
| Green India Mission | ₹104.29 crore |
| Metro equity investment | ₹5,566.43 crore |
| PM-KUSUM | ₹1,496 crore |
| National Green Hydrogen Mission | ₹304 crore |
| Solar programmes | ₹7,007.46 crore |
| Wind programmes | ₹800 crore |
| Railway-related eligible expenditure | ₹14,996.29 crore |
| Total eligible expenditure | ₹30,274.47 crore |
Corporate, Bank and Listed Green Bonds in India
The second part of India's market is green debt issued by companies, banks, financial institutions and other eligible entities.
SEBI maintains an ESG Debt Securities database that includes green bonds as well as some sustainability-linked instruments.
As of July 31, 2026, the total amount shown in the SEBI table was ₹21,678.59 crore.
There is an important data point to understand here.
Three entries in the same table are identified as sustainability-linked rather than green and together account for ₹3,050 crore. Subtracting those from the table total gives about ₹18,628.59 crore of issues explicitly identified as green.
This ₹18,628.59 crore figure is a News4Bharat calculation from SEBI's issuer-level data. It should not be described as the size of India's complete green bond market.
News4Bharat has also explained about the RBI Bond Auction 2026.
Latest Development: India's Market Is Moving Beyond Green Bonds
India's thematic debt market is also expanding into other categories.
SEBI issued a framework in June 2025 for ESG debt securities other than green debt, covering categories such as social bonds, sustainability bonds and sustainability-linked bonds.
A further development emerged in August 2026.
Reuters reported on August 18 that India is preparing for its first domestic "blue bond" issues, a category aimed at financing water and ocean-related projects. The report said Sagarmala Finance was working on an issue of up to ₹1,000 crore and Vadodara Municipal Corporation was preparing an issue of around ₹200 crore, with issuance targeted by the end of September 2026.
Blue bonds are not the same as green bonds, but the development shows how use-of-proceeds debt is moving into more specific categories.
For investors, this makes the quality of definitions, external review and impact reporting more important.
Does a Green Bond Give the Issuer Cheaper Money?
Sometimes, but not automatically.
Investors may accept a slightly lower yield for a green bond than for a similar regular bond from the same issuer. The market sometimes calls this pricing difference a greenium.
In simple terms, if a normal bond would need to offer 7.20 per cent but a comparable green bond can be sold at 7.17 per cent, the issuer's borrowing cost is lower by three basis points.
One basis point equals 0.01 percentage point.
The Economic Survey 2025-26 estimates India's Sovereign Green Bond pricing benefit at roughly 0 to 6 basis points and describes it as intermittent.
The Survey identifies several constraints:
- Limited trading in the secondary market.
- Smaller issue sizes compared with benchmark government securities.
- Issuance spread across different securities.
- Delays in impact reporting.
- Investors holding bonds until maturity rather than trading them.
The conclusion is straightforward. A green label alone does not guarantee cheaper borrowing.
For the pricing benefit to become more consistent, investors need liquid securities, regular issuance, comparable maturities and reporting that lets them verify how proceeds are used.
How India Compares With the Global Green Bond Market
Green bonds are now part of a market measured in trillions of dollars globally.
Climate Bonds Initiative reported that green-labelled bond issuance reached US$653.5 billion in 2025, accounting for about 64 per cent of aligned green, social, sustainability and related issuance during the year.
Cumulative green bond issuance had crossed US$4 trillion by the end of 2025.
World Bank market data put cumulative labelled sustainable bond issuance across categories at approximately US$7.52 trillion by June 2026. It also reported about US$280 billion of issuance in the second quarter of 2026.
India is therefore participating in a global market that has moved beyond the early stage of green-bond issuance. The domestic question is now less about whether such instruments exist and more about scale, reporting, liquidity, project selection and repeated issuance.
Green Bonds vs Regular Bonds
| Question | Regular bond | Green bond |
|---|---|---|
| Is it debt? | Yes | Yes |
| Does the issuer pay interest? | Usually | Usually |
| Is principal repaid at maturity? | According to bond terms | According to bond terms |
| Are proceeds restricted to environmental purposes? | Usually no | Yes, under the relevant framework |
| Does "green" guarantee repayment? | Not applicable | No |
| Does it automatically provide higher returns? | No | No |
| Is environmental reporting required? | Not normally | Usually part of the framework |
| Can governments issue it? | Yes | Yes |
| Can companies issue it? | Yes | Yes |
| Can cities issue it? | Yes | Yes |
News4Bharat POV
There is no single figure that gives a complete picture of India's green bond market. Four numbers are more useful.
- ₹72,697 crore: This is the cumulative Sovereign Green Bond issuance recorded from FY2022-23 through FY2025-26.
- ₹30,274.47 crore: This was actual eligible green expenditure in FY2024-25. It was higher than the ₹21,697.40 crore of Sovereign Green Bonds raised that year, showing that green bonds finance only part of eligible government spending.
- ₹18,628.59 crore: This is News4Bharat's calculation of issues explicitly labelled green in SEBI's ESG debt table as of July 31, 2026. It is separate from sovereign issuance and should not be presented as the total Indian market.
- 0 to 6 basis points: This is the Economic Survey's estimated range for India's sovereign green pricing benefit. It shows that the environmental label has not yet translated into a large or consistent reduction in government borrowing costs.
Together, these figures suggest that India's green bond market has reached the stage where quality of issuance matters as much as quantity.
Three areas will determine the next phase.
- First, issuance needs enough scale and regularity for investors to trade the securities.
- Second, allocation and impact reports need to arrive on a predictable schedule.
- Third, municipal and corporate issuance needs to broaden so that the market is not driven mainly by sovereign borrowing or a small number of large issuers.
This is also why the Bank of Baroda issue deserves attention. A ₹10,000 crore transaction accounts for more than half of the explicitly green amount in SEBI's July 2026 table. Headline growth can therefore be caused by individual large transactions rather than broad-based issuance.
Sources: Department of Economic Affairs, Department of Economic Affairs, SEBI, RBI, Government borrowing programme
Methodology and Data Notes: This article uses data available up to August 20, 2026. Sovereign issuance figures are taken from the Government of India, Economic Survey 2025-26, Department of Economic Affairs and government borrowing calendars. Eligible expenditure figures are drawn from Statement 15A of the Union Budget 2026-27 Expenditure Profile. Corporate, bank and municipal listed-debt figures use SEBI's ESG Debt Securities table as updated on July 31, 2026.