The Reserve Bank of India on Tuesday notified the framework for acceptance of “Green Deposit”. The provision of the framework is applicable to all 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), collectively known as Regulated Entities (REs).
A 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. The Green deposits are issued as cumulative/non-cumulative deposits. On maturity, the green deposits would be renewed or withdrawn at the option of the depositor. The green deposits shall be denominated in Indian Rupees only. The tenor, size, interest rate, and other terms and conditions (as applicable to the RE) as defined in the Master Direction – Reserve Bank of India (Interest Rate on Deposits) as amended from time to time
Green finance means allocating green deposit resources to lending/investing in green activities /projects. The allocation of proceeds raised from green deposits shall be based on the proposed official Indian green taxonomy (green taxonomy means environmentally sustainable investments). Pending finalization of the taxonomy, as an interim measure, REs shall be required to allocate the proceeds raised through green deposits towards the following list of green activities/projects which encourage energy efficiency in resource utilisation, reduce carbon emissions and greenhouse gases, promote climate resilience and/or adaptation and value and improve natural ecosystems and biodiversity.
The Green Deposit funds mobilized can be utilized for the following green activities/projects.
(1) Renewable Energy
(2) Energy Efficiency
(3) Clean Transportation
(4) Climate Change Adaptation
(5) Sustainable Water and Waste Management
(6) Pollution Prevention and Control
(7) Green Buildings
(8) Sustainable Management of Living Natural Resources and Land Use
(9) Terrestrial and Aquatic Biodiversity Conservation
The REs shall ensure that the funds raised through green deposits are allocated to eligible green activities/projects. The following projects or activities are excluded from green finance.
• Projects involving new or existing extraction, production and distribution of fossil fuels, including improvements and upgrades; or where the core energy source is fossil-fuel based.
• Nuclear power generation.
• Direct waste incineration.
• Alcohol, weapons, tobacco, gaming, or palm oil industries.
• Renewable energy projects generate energy from biomass using feedstock originating from protected areas.
• Landfill projects.
• Hydropower plants larger than 25 MW.
Third-Party Verification/Assurance and Impact Assessment
The allocation of funds raised through green deposits by REs during a financial year shall be subject to an independent Third-Party Verification/Assurance which shall be done on an annual basis. ‘The third-party assessment would not absolve the RE of its responsibility regarding the end-use of funds, for which the laid down procedures of internal checks and balances would have to be followed as in the case of other loans’ said RBI.
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