BTL 742 - Green Deposits

 

The Banking Tutor’s Lessons

BTL 742                                                                          09-01-2025

Green Deposits

The Reserve Bank of India (RBI) issued the Framework for acceptance of Green Deposits in April 2023 to encourage banks to offer green deposits to customers.

The framework aims to:

Protect depositors' interests

Help customers achieve their sustainability goals

Address greenwashing concerns

Increase the flow of credit to green projects

Enhance transparency

Ensure that the money goes to its intended cause

Features of Green Deposits:

Interest-bearing: Green deposits are fixed-term deposits that pay interest to investors.

Denominated in Indian Rupees: Green deposits are only denominated in Indian Rupees.

Funds allocated to green finance: The proceeds from green deposits are allocated to green finance projects.

Independent verification: The allocation of funds raised through green deposits is subject to an independent third-party verification annually.

Impact assessment: Banks assess the impact of the funds lent for or invested in green finance activities annually.

Renewal or withdrawal: On maturity, the depositor can choose to renew or withdraw the green deposit.

Examples of green projects include: Renewable energy projects, Biodiversity preservation projects, and Coastal and marine environment projects.

Sekhar Pariti

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