GREEN DEPOSITS

• The Reserve Bank of India issued detailed guidelines for acceptance of ‘green deposits’ by banks and NBFCs wherein the funds could be used for financing activities like renewable energy, green transport and green buildings. Hence, statement 1 is not correct.
• The financial sector can play a pivotal role in mobilising resources and their allocation thereof in green activities/projects
• Climate change has been recognised as one of the most critical challenges and globally, various efforts have been taken to reduce emissions as well as promote sustainability
• The purpose and rationale for the framework are to encourage Regulated Entities (REs) to “offer green deposits to customers, protect the 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”
• The projects must 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 projects or activities which are on the list where REs could allocate the proceeds raised through green deposits are renewable energy, energy efficiency, clean transportation, climate change adaptation, sustainable water and waste management, and green buildings
• Some of the projects are excluded from the list such as new or existing extraction, production and distribution of fossil fuels; nuclear power generation; and direct waste incineration
• Renewable energy, energy efficiency, clean transportation, climate change adaptation, sustainable water and waste management, and green buildings, are among the list of projects/activities where REs could allocate the proceeds raised through green deposits
• RBI has also mentioned about a list of ‘exclusions’ for REs, This includes projects involving new or existing extraction, production and distribution of fossil fuels; nuclear power generation; and direct waste incineration
• Banks and NBFCs will have to put in place a comprehensive board-approved policy on green deposits.