The Reserve Bank of India (RBI) on April 1 announced the framework for acceptance of Green Deposits of regulated entities (RE), to foster and develop a green finance ecosystem in the country. It will come into effect from June 1, 2023.
A green deposit means an interest-bearing deposit, received by the RE for a fixed period and the proceeds of which are earmarked for being allocated towards green finance.
The framework is intended to “encourage REs to offer green deposits to customers, protect interest of the depositors, aid customers to achieve their sustainability agenda, address greenwashing concerns and help augment the flow of credit to green activities/projects,” the central bank said in a release.
The framework is applicable to Scheduled Commercial Banks including Small Finance Banks, excluding Regional Rural Banks, Local Area Banks and Payments Banks and all deposit-taking Non-Banking Financial Companies (NBFCs), including Housing Finance Companies.
As per the framework, REs shall be required to allocate the proceeds raised through green deposits towards the following list of green activities/projects which encourage energy efficiency in resource utilisation, reduce carbon emissions and greenhouse gases, promote climate resilience and/or adaptation and value and improve natural ecosystems and biodiversity. It shall also put in Board-approved Financing Framework (FF) for the effective allocation of green deposits covering.
