The Reserve Bank of India (RBI) has recently released a new framework regarding Green Deposits.
This framework is aimed at encouraging banks and non-banking financial companies (NBFCs) to accept green deposits.
Starting from June 1, financial institutions will offer and accept these deposits,
which will be dedicated to financing renewable energy, green transportation, and the construction of environmentally-friendly buildings.
Several regulated entities, including HDFC, IndusInd Bank, DBS Bank, Federal Bank, and Central Bank of India,
have already begun offering green deposits for funding green initiatives and projects.
What Exactly is a Green Deposit?
A green deposit is a fixed-term investment option for individuals looking to invest their surplus funds in eco-friendly projects.
Unlike other deposits, green deposits have a specific purpose and can only be utilized for environmentally conscious endeavors.
The rules pertaining to maturity and redemption are the same as those governing regular deposits.
RBI’s Directive and Sectors Covered
The RBI has instructed financial institutions to extend the availability of green deposits across nine sectors, with renewable energy being one of them.
The other sectors include energy efficiency, green building, clean transportation, sustainable water and waste management, pollution prevention and control,
sustainable management of natural resources, terrestrial and aquatic biodiversity conservation, and land use.
The Importance of Green Deposits
Climate change is recognized as a major global challenge, prompting countries worldwide to undertake measures aimed at reducing emissions and promoting eco-friendly practices.
In light of this, the RBI introduced the framework on April 11,
emphasizing the role of the financial sector in mobilizing resources and allocating funds to support green activities and projects.
The framework’s objective is to encourage regulated entities to offer green deposits to customers while safeguarding the interests of depositors.
