Green Deposits

Why in news?

• The Reserve Bank of India (RBI) has come up with a regulatory framework for banks to accept green deposits from customers.

About Green Deposits:

• Green deposits are not very different from the regular deposits that banks accept from their customers.
• The only major difference is that banks promise to earmark the money that they receive as green deposits towards environment­-friendly projects.
• For example, a bank may promise that green deposits will be used towards financing renewable energy projects that fight climate change.

RBI’s regulatory framework on green deposits:

• The regulatory framework is aimed at preventing greenwashing, which refers to making misleading claims about the positive environmental impact of an activity.
  • For example, a bank may advertise that their green deposits will have a huge positive impact on the environment, while the actual impact may be minimal.
• RBI lays down certain conditions that banks must fulfill to accept green deposits from customers:
  • 1. Banks will have to come up with a set of rules or policies approved by their respective Boards that need to be followed while investing in green deposits from customers. These rules need to be made public on the banks’ websites.
  • 2. The banks will also have to disclose regular information about:
    • a) The amount of green deposits received
    • b) Deposits allocated towards various green projects
    • c) The impact of such investments on the environment.
  • 3. A third ­party will have to verify the claims made by banks regarding the projects in which the banks invest their green deposits.
  • 4. RBI has also come up with a list of sectors that can be classified as sustainable and thus eligible to receive green deposits. These include renewable energy, waste management, clean transportation, energy efficiency, and afforestation.

PRACTICE QUESTION:

With reference to regulatory framework for ‘Green Deposits’ in India, consider the following statements:

1. Green deposits do not bear interest

2. Renewable energy sector is eligible to receive green deposits

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer