Context:
National Bank for Agriculture and Rural Development has issued India’s first ‘AAA’ rated Indian Rupee denominated Social Bonds aggregating ₹1,040.50 crores
Key Details – Social Impact Bonds
What are SIBs?
- SIBs are financing mechanisms in which governments enter into agreements with social service providers (like NGOs) and investors to pay for the delivery of pre-defined social outcomes.
What is special about NABARD SIB?
- It is 1st externally certified AAA-rated (highest rating by the credit rating agency) Indian Rupee social bond in the country.
What are the projects eligible for funding?
- Affordable basic infrastructure, access to essential services, affordable housing, employment generation, food security, socioeconomic advancement, empowerment, energy efficiency projects including green buildings, energy storage, and smart grids etc.
How are SIBs different from other bonds?
- All SIBs have 2 important elements: accountability and up-front financing.
- Financing is provided upfront rather than when results are attained.
- Projects financed are required to report on outcomes basis as opposed to outputs of projects.
- Improve delivery of services as opposed to building physical infrastructure only.
What are the advantages of SIBs?
- Improve efficiency of social program, strengthen collaborative approach, boost responsible social investing.
What are the other SIBs at present?
- Utkrisht Impact Bond launched by United States Agency for International Development, was the world’s 1st Impact Bond in healthcare.
- India’s 1st SIB was co-created by the Pimpri-Chinchwad Municipal Corporation and UN Development Programme in 2020.
Source: The Hindu
Previous Year Question
With reference to Convertible Bonds, consider the following statements:
1. As there is an option to exchange the bond for equity, Convertible Bonds pay a lower rate of interest.
2. The option to convert to equity affords the bondholder a degree of indexation to rising consumer prices.
Which of the statements given above is/are correct?
[UPSC Civil Services Exam – 2022 Prelims]
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: (c)
