From 1 June 2023, banks that will be accepting green deposits will have to intimate the Reserve Bank of India – RBI about their plans to invest such funds. The idea is to ensure that there is transparency between the banks and the central bank along with the intention that the money goes in the right system.
The RBI’s rules and regulations are aimed to motivate the regulated entities, which are called by REs to provide green deposits to the customers, safeguard their interests, assist them in meeting the sustainability goals, and ensure that the credit flow has been reaching to the green activities or projects only.
Green deposits are a type of deposit that is allocated for ESG – Environment, Social, and Governance projects taken up by companies. A green deposit is similar to a fixed deposit, wherein customers get interest on their deposits that are kept for a fixed duration along with the principal amount on maturity and the amount that the bank collects from the depositors is allocated to green finance. Green finance is utilized by environmental-friendly companies to work on ESG projects.
According to the RBI’s framework, REs shall be needed to ensure that the green deposits are given only to the green activities or projects which involve the following:
Carbon emission reduction
Climate resilience and/or adaptation
Improvement of natural ecosystems and biodiversity.
The REs i.e. the registered entities will issue green deposits in the form of cumulative or non-cumulative deposits. The depositor gets the option to either renew the green deposits on maturity or he can withdraw the deposit. When customers invest in green deposits, banks get the opportunity to use the funds to provide loans to projects that work on the sustainability goals of the United Nations.
Several banks and financial institutions are providing green deposit schemes at lucrative interest rates. Some of the bank names include HSBC, Union Bank, DBS Bank, HDFC Bank, IndusInd Bank, and Federal Bank, among others. In HDFC green and sustainable deposit schemes, customers get an interest rate of 7.2% per year for a period of 61 to 120 months and a 7.3 % interest rate for a period of 36 to 60 months. For more details, you can visit the specific bank and they will guide you further.
It is really interesting to note that one can utilize their funds and be a part of such green projects through the support of banks and financial institutions. In the present times where technology has been advancing rapidly and the booming real-estate sector has ensured to build of homes wherever empty space is available, greenery has reduced and pollution has increased.
Companies that support such sustainability goals should be supported by the common public in whichever way possible. At least opening up one green deposit in the bank near you will make you also proud that you are supporting making the world a better place to live in. Also, you will get special interest rates for your noble initiative of opening green deposits in a bank or financial institution.