Acceptance of Green Deposits

A green deposit is a fixed-term deposit for investors who are looking to invest their surplus cash reserves in environmentally beneficial projects and initiatives.

• The Reserve Bank of India (RBI) has released a set of guidelines for banks and other financial institutions to accept green deposits. According to the central bank, funds earned through green deposits should be put to use for energy-efficient and energy-saving systems and installations in homes and buildings, clean transportation, sustainable water and waste management, pollution prevention and control, and design.
• Many initiatives have been made worldwide to reduce emissions and promote sustainability in response to climate change, which has been acknowledged as one of the greatest problems. The financial sector can be crucial in mobilising resources and allocating them to green initiatives and activities. In releasing the guidelines for regulated firms to accept green deposits, RBI said that green finance is also steadily gaining ground in India.
• The central bank further stated that the official Indian green taxonomy should be used to allocate the earnings received from green deposits. As a stopgap solution, REs would be forced to direct the funds earned through green deposits towards a predetermined list of green initiatives/projects while the taxonomy is still being finalised. The initiatives must promote energy-efficient resource use, lower carbon emissions and greenhouse gas emissions, support climate resilience and/or adaptation, and value and enhance biodiversity and natural ecosystems. The list of initiatives/projects where REs could deploy the funds earned through green deposits includes renewable energy, energy efficiency, clean mobility, climate change adaptation, sustainable water and waste management, and green buildings.

Moreover, RBI has mentioned a list of “exclusions” for REs. This covers initiatives using fresh or ongoing fossil fuel extraction, processing, and distribution, nuclear energy production, and direct waste incineration. Within three months of the end of the fiscal year, banks and NBFCs must present a review report to their board of directors that includes data on the sum raised under green deposits.