RBI releases framework to allow ‘Green Deposits’
Recently the Reserve Bank of India (RBI) has issued a framework to make ‘Green Deposits’ acceptable.
Green Deposit refers to an interest bearing deposit. It is received by regulated entities for a fixed period. The income earned from this is earmarked for allocation to green finance.
Objectives of the Framework:
- It provides green deposit opportunity to the customers,
- It protects the interest of the depositors,
- It helps clients achieve their sustainable agenda,
- It addresses concerns related to greenwashing, and
- It helps in increasing the flow of credit for green activities/projects.
Salient Features of the Framework for Acceptance of Green Deposits:
- Who is it for: It is open to all Scheduled Commercial Banks including Small Finance Banks. It is not applicable for Regional Rural Banks, Local Area Banks and Payments Banks.
- It is also applicable to housing finance companies (HFCs) including all deposit taking non-banking financial companies (NBFCs) registered with RBI.
- The Green Deposit will be denominated in Indian Rupees only.
- The amount raised through Green Deposit will be used to finance sectors/projects such as renewable energy, energy efficiency, clean transportation, climate change adaptation, sustainable water and waste management, green buildings.
- Many projects are not eligible for funding from the amount raised through Green Deposit.
- new or existing extraction, production and distribution of fossil fuels; nuclear power generation; direct waste incineration; Landfill Projects; Hydro power plants of capacity above 25 MW etc.
- The amount raised through Green Deposit will be verified by an independent third-party on an annual basis.
Green-washing refers to the marketing of products/services as green, when in fact they do not meet the criteria to be defined as green activities/projects.
Source – Indian Express