Green Deposit.

 

Green Deposits, a fixed deposit for a specific tenure, where the amount deposited by you will be used for lending to renewable energy projects, green building projects and projects in smart agriculture, water or waste management projects etc.

This new offering in the market indicates the increased awareness of the importance of ESG (Environmental, social and governance) and sustainable investing.
 

Key features of Green Deposits

 

The investment in this fixed tenure deposit will go towards financing eligible businesses and projects that promote the transition to a low-carbon, climate-resilient, and sustainable economy.

 

The amount for Green Deposits will be subject to limits basis availability of eligible projects and businesses.

 

Common themes for green deposits

 

Some of the common themes for green deposits are renewable energy, clean transportation, pollution prevention and control, green building, sustainable water, wastewater management, and others

 

Why Green Deposits

 

These deposits provide investors a platform to fulfill their sustainability goals by investing surplus cash balances into actions that matter the most.

 

Corporates looking for inclusion of a sustainability agenda into their treasury activities or those that have limited opportunities for investment in environmentally beneficial projects can invest in Green Deposit for corporate client.

 

RBI on April 11, 2023, issued detailed guidelines for acceptance of green deposits by banks and NBFC wherein the funds could be used for financing activities like renewable energy, green transport and green buildings.  The new framework being effective from June 1, 2023.

 

The purpose and rationale for the RBI framework is to encourage regulated entities (REs) to offer green deposits to customers, protest interest of the depositors, aid customers to achieve their sustainability agenda, address greenwashing concerns and help augment the flow od credit to the green projects or activities.

 

Also, the RBI said the allocation of proceeds raised from green deposits should be based on the official Indian green taxonomy.  Pending finalization of the taxonomy, as an interim measure REs would be required to allocate the proceeds raised through green deposit towards a specified list of green projects.

 

Now Banks and NBFCs will have to put in place a comprehensive board-approved policy on green deposits.