The Reserve Bank of India announced specific rules on Tuesday for banks and NBFCs to take ‘green deposits,’ which may be used to fund activities such as renewable energy, green transportation, and green buildings.
Climate change has been identified as one of the most pressing concerns, and numerous attempts have been made around the world to minimise emissions while also promoting sustainability.
The financial sector can be critical in mobilising resources and allocating them to green activities/projects. Green finance is gradually gaining popularity in India, according to the RBI, which recently provided a framework for regulated firms to accept green deposits.
Green deposits are already being offered by several Regulated Entities (REs) to fund green activities and projects. The framework will take effect on June 1, 2023.
The purpose and rationale for the framework, RBI said is to encourage REs to “offer green deposits to customers, protect interest of the depositors, aid customers to achieve their sustainability agenda, address greenwashing concerns and help augment the flow of credit to green activities/projects”.
Also Read | RBI raises repo rate by 25 basis points to 6.50 per cent
Furthermore, the central bank stated that income from green deposits shall be allocated in accordance with the official Indian green taxonomy. As a stopgap solution while the taxonomy is finalised, REs would be compelled to disburse the proceeds from green deposits to a specific list of green activities/projects.
