RBI issues Green Deposits by Banks, Understand in simple language

The Reserve Bank of India (RBI) on April 1 announced the framework for acceptance of Green Deposits of regulated entities (RE). The idea is to foster and develop a green finance ecosystem in the country. The framework shall come into effect from June 1, 2023.

What is green deposit?

Green Deposits is a fixed deposit for a specific tenure and the amount deposited by you will be used for lending to renewable energy projects, green building projects and projects in smart agri, water or waste management projects etc. It is just like an FD but the funds will be used for financing activities related to ecology.

Purpose of green deposit

The green deposit funds could be used for financing activities like renewable energy, green transport and green buildings. Climate change has been recognised as one of the most critical challenges and globally, various efforts have been taken to reduce emissions as well as promote sustainability.

The projects must 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.

Renewable energy, energy efficiency, clean transportation, climate change adaptation, sustainable water and waste management, and green buildings, are among the list of projects/activities where REs could allocate the proceeds raised through green deposits.

Applicable to whom

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.