r gandhi : green finance – early initiatives keynote speech by mr r gandhi, deputy governor of the reserve bank of india, at the launch of the final unep india inquiry report titled “ delivering a sustainable financial system in india ”, mumbai, 29 april 2016. * * * assistance provided by ms latha vishwanath is greatly appreciated. friends, 2. recognition is growing of the pressing challenge of financing sustainable development, and the opportunity it offers for channeling financial capital to productive, profitable and more broadly beneficial uses. the year 2016 is set to be the year of green finance. across the world, we are seeing a growing number of countries aligning their financial systems with the sustainability imperative. we welcome this new green finance initiative. 3. in this context, it gives me great pleasure to be here this morning to release the final unep india inquiry report titled “ delivering a sustainable financial system in india ”. the interim report on designing a sustainable financial system for india issued in february 2015 had flagged certain key issues in making the indian financial system ready to respond to climate change and other sustainable development priorities. i understand that the unep india inquiry led by ficci has had continuous dialogue and deliberations with various stakeholders. i would like to compliment the india advisory council, of unep india inquiry, chaired by ms naina lal kidwai, ficci and the unep india inquiry for this initiative. i am sure that the final india inquiry report gives a clear overview of the stakeholders ’ expectations. i suppose it brings out specific recommendations to urge the financial sector towards the sustainable development agenda. we will look forward to be examining any recommendation on policy changes that will help the financial sector to channel finance towards sustainable development. 4. in order to have a meaningful conversation on this topic, let me start with the definition of sustainable development : 5. sustainable development has been defined in many ways, but the most frequently quoted definition is from the brundtland report which says that “ sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. it contains within it two key concepts : • the concept of needs, in particular the essential needs of the world ’ s poor, to which overriding priority should be given ; and • the idea of limitations imposed by the state of technology and social organization on the environment ’ s ability to meet present and future needs. ” so how does sustainable development work? 6. sustainable development is often described as

important for ensuring stable demand in the market. a heterogeneous investor base with different time horizons, risk preferences, and trading motives ensures active trading, creating liquidity and allows borrowings at reasonable cost. from the investors ’ perspective, there is a need for investment options that provide decent returns and protect the capital. g - sec are apt investment products that would cater to these needs. in spite of such features, there is low retail interest in the government bonds and this investor apathy needs to be tackled by the regulators and market bodies. advantages for retail investors for the retail investor, government securities offer one of the better options for investment. the advantages for retail investors can be listed as under : • g - sec are risk free g - sec in domestic market context are risk free and carry no credit risk. though this assertion is being widely debated in wake of the events unfolding in the eurozone sovereign debt crisis, the fact remains that g - sec in the indian context are risk free. • g - sec offer decent yields for longer duration currently g - sec offer yields ranging from 8. 00 per cent to 8. 30 per cent and the tenor of securities extend up to thirty years. with government issuing securities at different points on the yield curve, g - sec offer an attractive option for savers who need low risk investment options for longer durations. • g - sec offer prospect of capital gains as there is an inverse relationship between bond price and interest rate, there is a prospect of capital gains when the interest rates moderate. one, however, must be conscious of market risks that could result in losses in case the interest rate cycle reverses. • g - sec have reasonable liquidity g - sec have reasonable liquidity and can be transacted on nds - om. retail investors can trade easily through banks and primary dealers with an sgl account in rbi. • g - sec help to diversify portfolio investments in government securities would help in portfolio diversification and consequently reduce risk for retail investors. drivers of retail participation the reasons for low retail interest in government securities stems from reasons, such as, low awareness and understanding regarding the market ; availability of competing financial instruments of broadly similar characteristics ; high transactions costs for intermediaries and lack of convenient access to the market. for market development, it is necessary to develop bis central bankers ’ speeches efficient mechanism for delivering simple products to retail clients. in many emerging markets, the administrative and information technology costs of going straight to retail investors have