Context:
- The framework for accepting green deposits was announced by the Reserve Bank of India (RBI).
- Beginning on June 1, the framework will be in effect.
Green Deposits
- A green deposit is an interest-bearing deposit that Registered Entities (RE) receive for a set period of time with the intent of using the proceeds for green finance.
- The money invested in this fixed-term deposit will be used to support projects and enterprises that support the shift to a low-carbon, climate-resilient, and sustainable economy.
Major Framework Highlights
- Applicability: It applies to all deposit-taking Non-Banking Financial Companies (NBFCs), including Housing Finance Companies, and Scheduled Commercial Banks, with the exception of Regional Rural Banks, Local Area Banks, and Payments Banks.
- Green deposits may be issued by Registered Entities (RE) on a cumulative or non-cumulative basis, and they may be renewed or withdrawn by the depositor at maturity.
- Green deposits will be subject to same conditions that apply to conventional public deposits.
distribution of funds - The distribution of monies raised by REs through green deposits during a financial year is subject to an annual independent third-party verification and assurance.
- Only Indian Rupees shall be used as the currency for the green deposits.
- Use: The money raised from green deposits will go toward projects like clean transportation, energy efficiency, and renewable energy, among other things.
- Exclusion
Nuclear power generation, direct waste incineration, alcohol, tobacco, weaponry, gaming, the palm oil industry, hydropower stations bigger than 25 MW, and other industries are among those that are excluded.
Targets and goals
- The goal is to support and grow the nation’s green finance ecosystem.
- It intends to resolve concerns about greenwashing, encourage regulated enterprises (REs) to offer green deposits to clients, safeguard depositors’ interests, assist customers in achieving their sustainability agendas, and encourage increased credit flow to green projects and activities.
Current Situation
- Green deposits are currently accepted by a number of banks, including Federal Bank, IndusInd Bank, and DBS Bank India.
Future Prospects
- Various initiatives have been made worldwide to reduce emissions and promote sustainability in response to climate change, which has been acknowledged as one of the greatest problems.
- The financial sector can be crucial in mobilizing resources and allocating them to green initiatives and activities. In
- India, where green finance is also gaining ground, the distribution of funds from green deposits should be based on the country’s official green taxonomy.
- The initiatives must promote resource utilization that is energy efficient and enhance biodiversity and natural habitats.
- Banks and NBFCs will need to implement a thorough, board-approved green deposit policy.