Authorities have promoted the issuance of 80 billion rupees ($984 million) to the country’s largest domestic asset managers, including state insurers, pension funds, and foreign investors. The insurance industry regulator will allow bonds to be factored into the infrastructure investments required by insurers. Banks can use it for compulsory government holdings, and there is no limit for foreign buyers.

This issue will take place over tenors of 5 and 10 years via an auction at a uniform price on January 25; a second similar offering is scheduled for February 9. Its proceeds will be used for unspecified projects that align with India’s green bond framework. Together, they provide a modest trial balloon for the country’s broader green finance goals. Prime Minister Narendra Modi has ambitious renewable energy plans and projects that build the country’s resilience to extreme weather and higher temperatures.

The bonds will be issued in an open framework, allowing foreigners to hold an unlimited number of securities. But some foreign investors may be put off by currency risks. The Indian issuance also allows proceeds to be used for compressed natural gas in public transport, which could also limit the appeal of some green investors.

Asia’s third-largest economy may rely more on local investors, who might want to avoid paying extra for a green issue. The South Asian nation does not have national debt funds dedicated to the environment. Indian companies typically issue green bonds in the offshore market, where demand is robust.

If this sovereign auction is oversubscribed and the cut-off yield is significantly lower than regular government bonds, this will encourage more green issuance next year.

Greeniums, reduced rates for environmental projects, have been declining globally. Thailand’s sustainable bond issue in September had a coupon 8 basis points lower than comparable Thai bonds.