RBI releases framework to allow ‘Green Deposits’

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.

These include:

  • 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

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

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