The Reserve Bank of India has created a regulatory framework for acceptance of Green Deposits. It came into effect from June 1, 2023.

Climate change has been recognised as one of the most critical challenges faced by the global society and economy in the 21st century. The financial sector can play a pivotal role in mobilizing resources and their allocation thereof in green activities/projects. Green finance is also progressively gaining traction in India.

“Deposits constitute a major source for mobilizing of funds by the Regulated Entities (REs). It is seen that some REs are already offering green deposits for financing green activities and projects. Taking this forward and with a view to fostering and developing green finance ecosystem in the country, it has been decided to put in place the enclosed Framework for acceptance of Green Deposits for the REs.” Says RBI. Details of RBI Framework are as follows:

Framework for acceptance of Green Deposits

A. Purpose/Rationale

To encourage regulated entities (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.

1. Applicability

The provisions of these instructions shall be applicable to the following entities, collectively referred to as regulated entities (REs):

Scheduled Commercial Banks including Small Finance Banks (excluding Regional Rural Banks, Local Area Banks and Payments Banks) and

All Deposit taking Non-Banking Financial Companies (NBFCs) registered with the Reserve Bank of India under clause (5) of Section 45IA of The Reserve Bank of India Act, 19341, including Housing Finance Companies (HFCs) registered under Section 29A of The National Housing Bank Act, 19872.

2. Definitions

In these guidelines, unless the context states otherwise, the terms herein shall bear the meaning assigned to them below:

  • "green activities/projects” means the activities/projects meeting the requirements prescribed in paragraph 7 of these guidelines;
  • “green deposit” means an interest-bearing deposit, received by the RE for a fixed period and the proceeds of which are earmarked for being allocated towards green finance;
  • “green finance” means lending to and/or investing in the activities/projects meeting the requirements prescribed in paragraph 7 of these guidelines that contributes to climate risk mitigation, climate adaptation and resilience, and other climate-related or environmental objectives - including biodiversity management and nature-based solutions;
  • “greenwashing” means the practice of marketing products/services as green, when in fact they do not meet requirements to be defined as green activities/projects.