The Reserve Bank of India (RBI) on 29 December said it is not mandatory for banks and NBFCs to raise green deposits, but in case they intend to do so they must follow the prescribed framework.
- In April 2023, RBI had issued detailed guidelines for acceptance of “green deposits” by banks and Non-Banking Financial Companies (NBFCs) wherein the funds could be used for financing activities like renewable energy, green transport and green buildings.
- The framework came into effect from June 1, 2023.
Green Deposits-salient features
- The current framework permits green deposits to be denominated in Indian rupees only.
- The RBI-regulated entities (REs) should pay interest on green deposits to their customers as per agreed terms and conditions and prescribed directions irrespective of allocation/utilisation of proceeds.
- There is no restriction on premature withdrawal of green deposits, however, the REs shall adhere to the extant guidelines referred to above.
- REs cannot finance green activities/ projects first and raise green deposits thereafter.
- The green activities/ projects financed under the framework can be classified under priority sector if they meet the requirements laid down in priority sector lending (PSL) guidelines of RBI.
- The deposits raised under the framework are covered by Deposit Insurance and Credit Guarantee Corporation (DICGC) in accordance with the Deposit Insurance and Credit Guarantee Corporation Act, 1961 and the regulations framed thereunder, as amended from time to time.
